ex10_6.htm


    
      
        
          
            

          

        

        Exhibit
          10.6

         

        Employment
          Agreement

         

        This
          Employment Agreement (the “Agreement”) is made and entered into
          this  15th day of November, 2006, by and between Petroleum Development
          Corporation, a Nevada Corporation (the “Company”), and Richard McCullough (the
“Employee”).

         

        WHEREAS,
          the Company wishes to employ the Employee as Chief Financial Officer and
          to
          perform the duties and services incident to such position 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
          THEREFOR, 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 shall be
                    November 13, 2006 (the “Effective Date”), and the initial term shall be
                    for the period beginning on the Effective Date and ending
                    December 31, 2008.

                


        

         

        
          	
                  b.  

                	
                  Automatic
                    Extensions.  The Term of this Agreement shall be extended
                    for an additional 12 months beginning on December 31, 2007 and
                    on each
                    successive December 31 unless either party provides the other
                    with at
                    least 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 7b.,  shall 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
                    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
                    section.  "Change of Control" of the Company shall 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 35% 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) shall 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.  

                	
                  Place
                    of Employment

                


        

         

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

         

        
          	
                  3.  

                	
                  Position
                    and Responsibilities

                


        

         

        
          	
                  a.  

                	
                  Position.
                    The Employee shall serve as the Chief Financial Officer and
                    Treasurer
                    of the Company and shall report to the President of the Company
                    (“President”) and be under the general direction and control of the
                    President.

                


        

         

        
          	
                  b.  

                	
                  Responsibilities.  The
                    Employee shall have obligations, duties, authority and power
                    to do such
                    acts as are customarily done by a person holding the same or
                    an equivalent
                    position 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 President and,
                    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
                    President 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 position 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 of Directors.  Provided,
                    however, that this restriction shall 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
                    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 Company’s
                    minimum stock ownership requirements for officers (other than
                    the Chief
                    Executive Officer); such requirements being that by the fifth
                    anniversary
                    of the Effective Date and until his Termination Date, the Employee
                    shall
                    maintain a minimum stock ownership equal to two times the Employee’s Base
                    Salary, as defined in Section 4a.

                


        

         

        
          	
                  4.  

                	
                  Compensation

                


        

         

        
          	
                  a.  

                	
                  Base
                    Salary.  The Company shall pay the Employee an annual base
                    salary of $235,000 (the “Base Salary”) commencing on the Effective Date
                    and ending on the Termination Date.  The Base Salary shall be
                    payable in accordance with the ordinary payroll practices of
                    the
                    Company.  The Base Salary shall be reviewed annually by the
                    Compensation Committee of the Board (“Compensation Committee”), and 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.  

                	
                  Signing
                    Bonus.  In addition to his Base Salary, the Employee shall
                    receive a $83,000 signing bonus (the “Signing Bonus”) payable on the first
                    pay period following the Effective Date; provided, however, that
                    if the
                    Employee’s employment with the Company is terminated before the
                    anniversary of the Effective Date, pursuant to Section 7.g, the
                    Employee
                    shall refund a pro-rata portion of the Signing Bonus.  The
                    refund shall be equal to $83,000 multiplied by a fraction, the
                    numerator
                    of which shall be the number of full and fractional months remaining
                    from
                    his Termination Date until the anniversary of his date of hire
                    and the
                    denominator of which shall be 12.

                


        

         

        
          	
                  c.  

                	
                  Performance
                    Bonus.  In addition to his Base Salary and the Signing
                    Bonus, the Employee shall be eligible to earn an annual performance
                    bonus
                    (the “Bonus”) during the Term, first payable in 2008 for 2007 performance,
                    based on the achievement of corporate performance objectives
                    to be
                    determined no later than the later of ninety (90) days after
                    the start of
                    each calendar year or fifteen (15) days after the filing of the
                    corresponding 10-K,  in writing by the Compensation Committee in
                    its sole discretion.  Performance criteria used in the
                    determination of the Bonus amount may include net income, cash
                    flow,
                    EBITDA, earnings per share, oil and gas production, reserves,
                    or such
                    other criteria as the Compensation Committee may determine to
                    be critical
                    to the performance of the Employee and the Company.  The “Target
                    Bonus” will be a specified percentage of the Base Salary, as contained
                    in
                    the Petroleum Development Corporation Short-Term Incentive Compensation
                    Plan, 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 the Compensation
                    Committee.  For 2007, the Target Bonus shall be equal to 50% of
                    the Employee’s Base Salary.  Notwithstanding the preceding
                    sentence, the Bonus for a given year shall not exceed the maximum
                    percentage of the aggregate Base Salary, as contained in the
                    Petroleum
                    Development Corporation Short-Term Incentive Compensation Plan,
                    for such
                    year.  For 2007, this maximum percentage shall be 75% of the
                    Employee’s Base Salary.  The Bonus shall be paid in cash no
                    later than March 15 of the following year.  To the extent
                    practicable, the Bonus shall meet the requirements for qualified
                    performance-based compensation under Internal Revenue Code Section
                    162(m).

                


        

         

        
          	
                  d.  

                	
                  Retirement
                    Compensation.  For each complete year worked under this
                    Agreement beginning from the Effective Date and each anniversary
                    thereof,
                    the Employee shall earn and be entitled to receive an annual
                    retirement
                    payment equal to $7,500 (the “Retirement Payment”).  For
                    example, if the Employee is employed for five years and eight
                    months under
                    this Agreement, the annual Retirement Payment would be 5 x $7,500
                    =
                    $37,500.  The 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.

                


        

         

        
          	
                  e.  

                	
                  Equity
                    Compensation Grant.  As a long term incentive, on the
                    Effective Date under the Company’s Long-Term Equity Compensation Plan, the
                    Employee shall receive an award of stock options equal in value
                    to thirty
                    percent (30%) of the 2007 Base Salary of the Employee and restricted
                    stock
                    equal in value to seventy percent (70%) of the 2007 Base Salary
                    of the
                    Employee.  For this purpose, the value of the stock shall be
                    based on the closing market price of the Company on November
                    14, 2006 and
                    the value of the stock and the value of the stock options shall
                    be
                    determined by the compensation committee.   The stock
                    options and restricted stock shall vest at the rate of 25% for
                    each
                    complete year worked by the Employee under this Agreement, beginning
                    from
                    the Effective Date and each anniversary
                    thereof.

                


        

         

        
          	
                  f.  

                	
                  Other
                    Compensation.  The Employee shall 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.

                


        

         

        
          	
                  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.  The Company is also providing the
                    Employee a comprehensive moving package as outlined under its
                    written
                    Executive Relocation Policy dated October 1, 2006 except the
                    parties
                    acknowledge that as part of this relocation the Company will
                    not be
                    responsible for (1) the amount of any real estate fees for the
                    sale of the
                    Employee’s current residence in Atlanta, nor (1) any expenses associated
                    with the move of household furniture and
                    furnishings.

                


        

         

        
          	
                  b.  

                	
                  Vacation.  The
                    Employee will be entitled to four weeks 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 will 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 Board shall deem reasonably 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
                    President.  All expense reimbursements for a calendar year shall
                    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 with a person or persons named by the
                    Employee as
                    either the owner or the beneficiary as the Employee shall direct,
                    and for
                    the cost of a disability policy consistent with what is provided
                    to other
                    executive officers of the Company.

                


        

         

        
          	
                  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 shall 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 shall be entitled to use of a Company
                    automobile
                    for general business purposes.

                


        

         

        
          	
                  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 shall include, without
                    limitation:

                


        

         

        
          	
                  (i)  

                	
                  Brokers,
                    broker/dealer firms, law firms used to prepare partnership registration
                    statements, due diligence investigators, or other parties involved
                    with
                    the registration, review, or offering of the Company’s 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 material prepared or compiled by
                    the
                    Employee or furnished to the Employee during the Term shall be
                    the sole
                    and exclusive property of the Company and none of such material
                    shall be
                    retained by the Employee upon termination of his
                    employment.  Notwithstanding the foregoing, the Employee shall
                    be under no obligation to return public
                    information.

                


        

         

        
          	
                  c.  

                	
                  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" shall include
                    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.

                


        

         

        
          	
                  d.  

                	
                  Non-Compete.  Beginning
                    with the second anniversary of the Effective Date, the Employee
                    shall not,
                    directly or indirectly, 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 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.

                


        

         

        
          	
                  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 shall 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
                    shall be
                    cumulative and shall 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 30 days written Notice of Termination to the
                    other
                    party.  "Notice of Termination" shall mean 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 or
                    Section 7.g.) 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 shall be effective without such Notice
                    of
                    Termination; provided further, however, any purported termination
                    by the
                    Company or by Employee shall be communicated by a Notice of Termination
                    to
                    the other party hereto in accordance with  Section 8 (“Notices”)
                    of this Agreement.

                


        

         

        
          	
                  b.  

                	
                  Termination
                    Date.  The “Termination Date” shall mean the date specified
                    in the Notice of Termination. The Termination Date shall not
                    be less than
                    thirty (30) days after the date such Notice of Termination is
                    given;
                    provided, however, that if within fifteen (15) days after any
                    Notice of
                    Termination is given the party receiving such Notice of Termination
                    notifies the other party that a dispute exists concerning the
                    termination,
                    the Termination Date shall be the date finally determined by
                    either mutual
                    written agreement of the parties or by the final judgment, order
                    or decree
                    of a court of competent jurisdiction (the time for appeal there
                    from
                    having expired and no appeal having been
                    taken).

                


        

         

        
          	
                  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 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,
                    retirement 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.  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 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).

                


        

         

        
          	
                  (ii)  

                	
                  For
                    purposes of this Agreement “Just Cause” shall be 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)  

                	
                  conduct
                    by Employee which demonstrates Employee's gross unfitness to
                    serve the
                    Company as Chief Financial Officer {that is not remedied by Employee
                    within fourteen (14) days of written notice of such unfitness
                    from the
                    Board} 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 shall not be deemed to have been terminated with Just
                    Cause under
                    (ii)(B), (C) or (D), unless there shall 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.  In the event the Company
                    terminates this Agreement prior to its expiration (including
                    extensions as
                    provided in Section1.b) for any reason other than for Just Cause
                    or the
                    death or Disability (as defined in Section 7e.) of the Employee,
                    the
                    Company shall:

                


        

        
          	
                  (i)       
                       

                	
                  (A)

                	
                   If
                    the Termination Date for the Employee is on or prior to the anniversary
                    of
                    the Effective Date, pay to the Employee twelve months of Base
                    Salary.

                


           

        

        
          	
                  (B)  

                	
                  If
                    the Termination Date for the Employee occurs after the anniversary
                    of the
                    Effective Date, but on or prior to the second anniversary of
                    the Effective
                    Date, pay to the Employee eighteen months of Base
                    Salary.

                


        

         

        
          	
                  (C)  

                	
                  If
                    the Termination Date for the Employee occurs after the second
                    anniversary
                    of the Effective Date, pay to the Employee within 30 days after
                    the
                    Termination Date a 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 to the Employee during the same two year
                    period.

                


        

         

        
          	
                  (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,

                


        

         

        
          	
                  (iii)  

                	
                  If
                    the Termination Date for the Employee is on or after the anniversary
                    of
                    the Effective Date, vest any unvested Company stock options or
                    restricted
                    stock,

                


        

         

        
          	
                  (iv)  

                	
                  Pay
                    any deferred income or retirement payment or other benefit payments
                    due
                    under this or any other agreements or plans, provided such payments
                    may be
                    made under the schedule originally contemplated in the agreement
                    under
                    which they were granted, or in full without discount within 60
                    days of the
                    Termination Date at the discretion of the
                    Company,

                


        

         

        
          	
                  (v)  

                	
                  Make
                    any other payments or provide any benefits earned under this
                    or any other
                    employment agreement or plan,

                


        

         

        
          	
                  (vi)  

                	
                  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.

                


        

         

        
          	
                   

                	
                  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 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).

                


        

         

        
          	
                  e.  

                	
                  Termination
                    in the Event of Death or Disability.  This Agreement may be
                    terminated by the Company in the event of the death or 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. of this Agreement, except
                    for the
                    Bonus or incentive compensation, which would have been earned
                    for  (6) months after the Termination Date.  The
                    benefits provided under this Section shall be no less favorable
                    to
                    Employee in terms of amounts, deductibles and costs to him, if
                    any, than
                    such benefits provided by the Company to him and shall not be
                    interpreted
                    so as to limit any benefits to which Employee, as a terminated
                    employee of
                    the Company, or his family may be entitled under the Company's
                    life
                    insurance, medical, hospitalization or disability plans following
                    his
                    Termination Date or under applicable law, and any other benefits
                    or
                    payments earned by the employee under this or any other agreement
                    or
                    plan.  "Disability" shall mean being eligible to receive a
                    disability benefit under the Federal Social Security Act.  All
                    amounts payable under this Section 7e. shall 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)  

                	
                  In
                    the event the Employee terminate this Agreement for Good Reason
                    (as
                    defined in Section f.ii), the Company
                    shall:

                


        

         

        


        
          	
                  (A)  

                	
                  Pay
                    to the employee within 30 days after the Termination Date a 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 to the Employee
                    during the same two year period.  If the agreement is terminated
                    within the first year, the “highest bonus” amount to be used for this
                    provision will be the target bonus in effect for year 2007 (i.e.
                    50% of
                    base compensation),

                


        

         

        
          	
                  (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,

                


        

         

        
          	
                  (C)  

                	
                  Vest
                    any unvested Company stock options or restricted
                    stock,

                


        

         

        
          	
                  (D)  

                	
                  Pay
                    any deferred income or retirement payment or other benefit payments
                    due
                    under this or any other agreements or plans, provided such payments
                    may be
                    made under the schedule originally contemplated in the agreement
                    under
                    which they were granted, or in full without discount within 60
                    days of the
                    Termination Date at the discretion of the
                    Company,

                


        

         

        
          	
                  (E)  

                	
                  Make
                    any other payments or provide any benefits earned under this
                    or any other
                    employment agreement or plan,

                


        

         

        
          	
                  (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.

                


        

         

        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 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

         

        
          	
                  (ii)  

                	
                  "Good
                    Reason" shall mean the occurrence of any of the following events
                    without
                    Employee's prior express written
                    consent:

                


        

         

        
          	
                  (A)  

                	
                  The
                    Employee is assigned any duties materially and adversely inconsistent
                    with
                    his position, duties, responsibilities and status with the Company
                    as in
                    effect at the Effective Date or as may be assigned to the Employee
                    pursuant to Section 3 of this
                    Agreement;

                


        

         

        
          	
                  (B)  

                	
                  The
                    title or offices in effect as of the date of this Agreement or
                    as the
                    Employee may be appointed to or elected to in accordance with
                    Section 3
                    are materially and adversely
                    changed;

                


        

         

        
          	
                  (C)  

                	
                  There
                    is a Change of Control of the Company as defined in Section
                    1c.;

                


        

         

        
          	
                  (D)  

                	
                  There
                    is a reduction in the Base Salary  (as such Base Salary shall
                    have been increased from time to time) payable to the Employee
                    pursuant to
                    Section 4 of this Agreement;

                


        

         

        
          	
                  (E)  

                	
                  The
                    Company fails to continue in effect any material employee benefit
                    plan
                    (including any medical, hospitalization, life insurance or disability
                    benefit plan in which Employee participates), or any material
                    fringe
                    benefit or perquisite enjoyed by him unless either an equitable
                    arrangement (embodied in an ongoing substitute or alternative
                    plan) has
                    been made with respect to the failure to continue such plan or
                    the
                    Employee is not materially and adversely damaged, or the failure
                    by the
                    Company to continue Employee's participation therein, or any
                    action by the
                    Company which would directly or indirectly materially reduce
                    his
                    participation therein or reward opportunities thereunder, or
                    the failure
                    by the Company to provide him with the benefits to which he is
                    entitled
                    under this Agreement; provided, however, that Employee continues
                    to meet
                    all eligibility  requirements thereof and has not otherwise been
                    terminated in accordance with this
                    Agreement;

                


        

         

        
          	
                  (F)  

                	
                  The
                    Company requires or attempts to require the Employee to be based
                    anywhere
                    more than 60 miles outside of Bridgeport, West Virginia, except
                    reasonably
                    required travel in connection with the Company’s
                    business;

                


        

         

        
          	
                  (G)  

                	
                  The
                    Company fails to obtain a satisfactory agreement from any successor
                    or
                    assign of the Company to assume and agree to perform this Agreement,
                    as
                    contemplated in Section 10 (Successors)
                    hereof;

                


        

         

        
          	
                  (H)  

                	
                  Any
                    material breach by the Company of any material provision of this
                    Agreement; or

                


        

         

        
          	
                  (I)  

                	
                  Any
                    purported Termination of the Employee’s employment by the Company for Just
                    Cause that does not comply with the terms of Sections 7.c.ii
                    (Definition
                    of Just Cause) of this Agreement.

                


        

         

        
          	
                  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)  

                	
                  The
                    compensation provided in Section 4 at the rate in effect at the
                    time the
                    Notice of Termination. The Base Salary, Bonus and incremental
                    Retirement
                    Payment shall 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
                    shall 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 may be made under the schedule
                    originally contemplated in the agreement under which they were
                    granted or
                    in full without discount within 60 days of the Termination Date
                    at the
                    discretion of the Company;

                


        

         

        
          	
                  (iii)  

                	
                  Any
                    unpaid expense reimbursement upon presentation by the Employee
                    of an
                    accounting of such expenses in accordance with normal Company
                    practices;
                    and

                


        

         

        
          	
                  (iv)  

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

                


        

         

        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 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.  

                	
                  Notices.
                    For the purposes of this Agreement, notices and all other communications
                    provided for in the Agreement shall be in writing and shall 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 shall 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 shall 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
                    shall be effective only upon
                    receipt.

                


        

        


        
          
            
              	
                      Company
                        at:

                    	
                      Petroleum
                        Development Corporation

                    
	 	
                      P.O.
                        Box 26

                    
	 	
                      103
                        E. Main Street

                    
	 	
                      Bridgeport,
                        WV 26330

                    
	 	 
	
                      Employee
                        at:

                    	
                      Richard
                        McCullough

                    
	 	
                      P.O.
                        Box 26

                    
	 	
                      109
                        E. Main Street

                    
	 	
                      Bridgeport,
                        WV   26330

                    


            

          

        

        


        
          	
                  9.  

                	
                  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 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.

                


        

         

        
          	
                  10.  

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

                


        

         

        
          	
                  12.  

                	
                  Modification
                    and Waiver.  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 shall 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 shall 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 shall 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
                    shall be valid unless the same is in writing and signed by all
                    of the
                    parties hereto.

                


        

         

        
          	
                  16.  

                	
                  Survival
                    of Obligations.  The provisions of Section 5.e. and Section
                    6 of this Agreement shall 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 shall not be rendered void but shall
                    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.

                


        

         

        
          	
                  18.  

                	
                  Governing
                    Law.  This Agreement shall be construed and enforced
                    pursuant to the laws of the State of West
                    Virginia.

                


        

         

        
          	
                  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, shall 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 shall 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 shall serve as the sole arbitrator
                    of the
                    controversy or claim.  The third arbitrator shall be experienced
                    in the matters in dispute.  In the event that the third and sole
                    arbitrator is not agreed upon, the American Arbitration Association
                    shall
                    name him or her.  Arbitration shall occur in Bridgeport, West
                    Virginia, or such other location agreed to by the Company and
                    Employee.  The award made by the third arbitrator shall 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 shall 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 1993, 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 shall 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.

                


        

         

        
          	
                  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 shall
                    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/
                    David C. Parke 	 	 /s/
                    Richard McCullough
	 	
                    David
                      C. Parke

                  	 	
                    Richard
                      McCullough

                  
	
                    Position:

                  	
                    Chairman
                      of the

                  	 	 
	 	
                    Compensation
                      Committee