Exhibit 10.16


 


CIMAREX
ENERGY CO.


 


DEFERRED
COMPENSATION PLAN


 


FOR
NONEMPLOYEE DIRECTORS


 


 


Effective as
of May 19, 2004


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  “ACCOUNT”

  	
  1

  
	
  1.2

  	
  “ADMINISTRATOR”

  	
  1

  
	
  1.3

  	
  “BENEFICIARY”

  	
  1

  
	
  1.4

  	
  “BOARD”

  	
  1

  
	
  1.5

  	
  “CODE”

  	
  1

  
	
  1.6

  	
  “COMPANY”

  	
  1

  
	
  1.7

  	
  “COMMITTEE”

  	
  1

  
	
  1.8

  	
  “COMMON STOCK”

  	
  1

  
	
  1.9

  	
  “DEFERRED COMPENSATION UNITS”

  	
  1

  
	
  1.10

  	
  “DIRECTOR”

  	
  1

  
	
  1.11

  	
  “DIRECTOR’S FEES”

  	
  1

  
	
  1.12

  	
  “ELIGIBLE DIRECTOR”

  	
  2

  
	
  1.13

  	
  “PARTICIPANT”

  	
  2

  
	
  1.14

  	
  “PLAN”

  	
  2

  
	
  1.15

  	
  “RESTRICTED STOCK”

  	
  2

  
	
  1.16

  	
  “UNFORESEEABLE EMERGENCY”

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE II DEFERRALS

  	
  2

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  DEFERRAL ELECTIONS

  	
  2

  
	
  2.2

  	
  ALLOCATION OF DEFERRALS

  	
  2

  
	
  2.3

  	
  CHANGES IN DEFERRAL ELECTIONS

  	
  2

  
	
  2.4

  	
  ACCOUNTING

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE III ACCOUNTS

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  ESTABLISHMENT AND NATURE OF PARTICIPANT
  ACCOUNTS

  	
  3

  
	
  3.2

  	
  ACCOUNT EARNINGS

  	
  3

  
	
  3.3

  	
  CHANGE IN OUTSTANDING SHARES

  	
  3

  
	
  3.4

  	
  ACCOUNT STATEMENTS

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV VESTING

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE V DISTRIBUTIONS

  	
  4

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  TIMING AND FORM OF DISTRIBUTION

  	
  4

  
	
  5.2

  	
  CHANGE OF CONTROL

  	
  4

  
	
  5.3

  	
  UNFORESEEABLE EMERGENCY

  	
  7

  
	
  5.4

  	
  PAYMENT OF BENEFITS FOLLOWING DEATH

  	
  7

  
	
  5.5

  	
  DISTRIBUTION IN EVENT OF TAXATION

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI ADMINISTRATION

  	
  8

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  PLAN ADMINISTRATION

  	
  8

  
	
  6.2

  	
  CLAIMS PROCEDURE

  	
  8

  
	
  6.3

  	
  EXPENSES

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII AMENDMENT, MODIFICATION AND TERMINATION

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII MISCELLANEOUS

  	
  9

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  UNFUNDED PLAN

  	
  9

  
	
  8.2

  	
  WITHHOLDING FOR TAXES AND OTHER DEDUCTIONS

  	
  9

  
	
  8.3

  	
  NO RIGHT TO DIRECTORSHIP

  	
  9

  
	
  8.4

  	
  NO RIGHTS AS A STOCKHOLDER.

  	
  9

  
	
  8.5

  	
  ALIENATION PROHIBITED

  	
  9

  
	
  8.6

  	
  GENERAL LIMITATION OF LIABILITY

  	
  9

  
				



 


i

















 


	
  8.7

  	
  APPLICABLE LAW

  	
  10

  
	
  8.8

  	
  SUCCESSORS AND ASSIGNS

  	
  10

  



 


ii

















 


DEFERRED COMPENSATION PLAN


 


FOR NONEMPLOYEE DIRECTORS


 


PREAMBLE


 


CIMAREX ENERGY CO., a Delaware corporation, hereby adopts the Cimarex
Energy Co. Deferred Compensation Plan for Nonemployee Directors (the “Plan”),
effective as of May 19, 2004 (the “Effective Date”), to permit nonemployee
directors of its Board of Directors to defer receipt a portion of their
anticipated Director’s Fees.


 


ARTICLE I


 


DEFINITIONS


 


Whenever used herein, the following terms shall have the respective
meanings set forth below, unless the context clearly indicates otherwise. In
addition, unless some other meaning or intent is apparent from the context, the
plural shall include the singular and vice versa; and masculine, feminine and
neuter words shall be used interchangeably.


 


1.1                                 “Account”
means, with respect to each Participant, the Cash Account and the Deferred
Compensation Unit Account established pursuant to ARTICLE III below.


 


1.2                                 “Administrator”
means the Company’s Human Resource Officer.


 


1.3                                 “Beneficiary”
means the person, trust or other entity designated by the Participant in
accordance with Section 5.4 below to receive payment under the Plan in the
event of the Participant’s death. If the Participant fails to designate a
Beneficiary, or if all of the Participant’s designated Beneficiaries predecease
the Participant, then the Participant’s Beneficiary shall be his or her estate.


 


1.4                                 “Board”
means the Board of Directors of the Company.


 


1.5                                 “Code”
means the Internal Revenue Code of 1986, as now or hereafter amended and in
effect.


 


1.6                                 “Company”
means Cimarex Energy Co., a Delaware corporation.


 


1.7                                 “Committee”
means the Governance Committee of the Board or such other committee, officer or
person as the Board may designate from time to time.


 


1.8                                 “Common
Stock” means the Company’s common stock, $0.01 par value, and, after
substitution, such other stock as may be substituted therefor pursuant to Section 3.3.


 


1.9                                 “Deferred
Compensation Units” shall mean units held in a notional account in which
each unit represents a value equivalent to one share of common stock of the
Company.


 


1.10                           “Director”
means a member of the Board.


 


1.11                           “Director’s
Fees” means the annual retainer, attendance fees, committee membership
fees, or other compensation, paid in cash or Restricted Stock by the Company to
a Director for services as a Director. Director’s Fees shall not include
expense reimbursements.


 


1

















 


1.12                           “Eligible
Director” means a Director who is not a common-law employee of the Company
or any subsidiary of the Company.


 


1.13                           “Participant”
means an Eligible Director who has elected to defer payment of all or a portion
of his or her Director’s Fees under the Plan. A person remains a Participant so
long as he or she has an Account balance under the Plan, whether or not such
person remains an Eligible Director.


 


1.14                           “Plan”
means the Cimarex Energy Co. Deferred Compensation Plan for Nonemployee
Directors, as set forth herein, together with all amendments hereto.


 


1.15                           “Restricted
Stock” shall have the meaning ascribed to such term by the Cimarex Energy
Co. 2002 Stock Incentive Plan.


 


1.16                           “Unforeseeable
Emergency” means a severe financial hardship to the Participant resulting
from a sudden and unexpected illness or accident of the Participant, of the
Participant’s spouse or of a dependent (as defined in Code section 152(a))
of the Participant, loss of the Participant’s property due to casualty, or
other similar extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Participant. The need to pay college
tuition and the desire to purchase a home will not be considered to constitute
Unforeseeable Emergencies.


 


ARTICLE II


 


DEFERRALS


 


2.1                                 Deferral
Elections. An Eligible Director may elect to defer all or any portion
of the Director’s Fees that he or she anticipates earning. The election shall
be made and filed with the Company no later than the last day of the calendar
year prior to the calendar year in which Director’s Fees that are payable in
cash would otherwise be payable. In the case of Director’s Fees payable in
Restricted Stock, the election shall be made no later than twelve months prior
to the date on which the restrictions lapse. Such elections shall be made by
filing a written notice with the Company in such form, in such manner and by
such time as the Administrator shall specify. Notwithstanding the foregoing,
the initial elections under this Plan shall be made not later than thirty days
after the Effective Date. Notwithstanding the foregoing, a Director who first
becomes an Eligible Director during a calendar year may, within thirty days
following the date on which he or she becomes an Eligible Director, elect to
defer Director’s Fees that he or she has not yet earned (as of the date such
Director files a deferral election with the Company). Once made, an election to
defer shall be irrevocable.


 


2.2                                 Allocation
of Deferrals. Deferrals of cash compensation shall be allocated to the Cash
account. Deferrals of Restricted Stock shall be allocated to the Deferred
Compensation Unit account.


 


2.3                                 Changes
in Deferral Elections. A Participant’s deferral election shall remain in
effect until terminated or modified by the Participant pursuant to this Section 2.3.
A Participant may terminate or modify his or her deferral election by
filing a new deferral election with the Company in accordance with the
provisions of Section 2.1 above. New deferral elections shall become
effective on the later of (i) the date specified in the election, or (ii) twelve
months after the date the new election is signed.


 


2.4                                 Accounting.
The Company shall credit a Participant’s deferrals during a calendar year to
the Account established for such Participant for such year, pursuant to ARTICLE III
below, as of the date on which the amount deferred would otherwise have been
paid or made available to the Participant.


 


2

















 


ARTICLE III


 


ACCOUNTS


 


3.1                                 Establishment
and Nature of Participant Accounts. The Company shall establish and
maintain, in the name of each Participant, Accounts to reflect the Participant’s
interest under the Plan. A separate Account shall be established and maintained
for each Participant for each year in which such Participant makes deferrals
under the Plan. Each such Account may, depending on the Eligible Director’s
election, include the following subaccounts: 
Cash Account and a Deferred Compensation Unit Account. The maintenance
of such Accounts is for recordkeeping purposes only. No funds or other assets
of the Company shall be segregated or attributable to the amounts that may be
credited to a Participant’s Accounts from time to time, but rather benefit
payments under the Plan shall be made solely from the general assets of the
Company at the time any such payments become due and payable.


 


3.2                                 Account
Earnings.


 


(a)                                  Cash
Account. All amounts credited to a Participant’s Cash Account shall bear
interest from the date as of which such amounts are credited to the Cash
Account through the date on which they are actually paid to the Participant. The
Company shall credit such interest to each of a Participant’s Cash Accounts as
of the last day of each calendar quarter; provided, however, that interest for
the quarter in which an Account is distributed shall be credited to that
Account no later than the date of distribution. The rate of interest earned by
each Account for a calendar quarter shall be based on [the average 10-year U.S.
Treasury note rate for the immediately preceding calendar quarter, plus one
percent].


 


(b)                                 Deferred
Compensation Unit Account. Deferrals credited to a Participant’s Deferred
Compensation Unit Account will be credited in units, each of which is equal in
value to one share of Common Stock, in accordance with standard recordkeeping
procedures. If the Company pays a dividend on its Common Stock, the Company
shall pay to a Participant who has a Deferred Compensation Unit Account a cash
payment that is equal to the product of the dividend per share times the number
of Deferred Compensation Units credited to the Participant’s Deferred
Compensation Unit Account on the record date for the dividend. The cash payment
shall be treated as additional compensation subject to all required tax
payments.


 


3.3                                 Change
in Outstanding Shares. In the event of any change in outstanding Common
Stock by reason of any stock dividend or split, recapitalization, merger,
consolidation or exchange of shares or other similar corporate change, the
Board shall make such adjustments, if any, that it deems appropriate in the
number of Deferred Compensation Units then credited to the Participants’
Accounts. Any and all such adjustments shall be conclusive and binding upon all
parties concerned.


 


3.4                                 Account
Statements. After the close of each calendar year, or more frequently as
the Administrator, in its sole discretion, determines, the Company shall
furnish each Participant with a statement of the value of his or her Accounts.


 


ARTICLE IV


 


VESTING


 


A Participant shall be fully vested in his or her Accounts at all
times, subject only to his or her status as a general unsecured creditor of the
Company in the event of the Company’s insolvency or


 


3

















 


bankruptcy and provided that Deferred
Compensation Units shall become vested at the same time that the restirictions
on the Restricted Stock for which they were exchanged would have lapsed.


 


ARTICLE V


 


DISTRIBUTIONS


 


5.1                                 Timing
and Form of Distribution.


 


(a)                                  Except
as provided otherwise in this ARTICLE V, each of the Participant’s
Accounts shall be distributed or commence to be distributed to the Participant
on, or as soon as administratively practicable after, the earlier of the
distribution date specified for such Account by the Participant, the
termination of the Participant’s service as a director, or the termination of
the Plan; provided, however, that if the Participant elects a distribution date
that is prior to the date on which he or she ceases to be a Director, such date
may not be earlier than the first day of the fourth calendar year
commencing after the date of deferral. Subject to subsection 5.1(c) below,
the Participant shall specify the date on which each of his or her Accounts
shall be distributed or shall commence to be distributed at the time he or she
makes, and as a part of, an election to defer the Director’s Fees credited
to that Account. The Participant may make a separate election with respect
to each of his or her Accounts.


 


(b)                                 Except
as provided otherwise in this ARTICLE V, each of the Participant’s
Accounts shall be distributed to the Participant in the form elected for
such Account by the Participant. The Participant may elect to have an
Account distributed in either a lump sum or in annual installments over a
period not to exceed five (5) years. Subject to subsection 5.1(c) below,
the Participant shall specify the form in which each of his or her
Accounts is to be distributed at the time such Participant makes, and as a part of,
an election to defer the Director’s Fees credited to that Account. The
Participant may make a separate election with respect to each of his or
her Accounts.


 


(c)                                  A
Participant may change the timing and/or form of distribution for one
or more of his or her Accounts at any time, so long as such change is requested
in writing (and such request is filed with the Company) at least twelve (12)
months prior to the date on which any of the Accounts to which it relates is
scheduled to be distributed or to commence to be distributed and the new
payment date is at least sixty (60) months after the original payment date;
provided, however, that the Participant may not make more than one such
change. Any change that is requested by a Participant within twelve (12) months
of the date on which any of the Accounts to which it relates is scheduled to be
distributed or to commence to be distributed, or a second change to the timing
and/or form of distribution for any of the Participant’s Accounts, shall
be null and void.


 


5.2                                 Change
of Control.


 


(a)                                  Notwithstanding
Section 5.1 above, if the Company amends the Plan, following a “Change of
Control,” as defined in subsection 5.2(b) below, all account balances
shall be fully vested and shall be paid in a single lump sum within 30 days.


 


(b)                                 For
purposes of this Section 5.2, “Change of Control” means any one of the
following:


 


(i)                                     The
acquisition after the Effective Date of this Plan by any individual, entity or
group (within the meaning of Section 13(d) (3) or 14(d) (2) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 15% or more of either (1) the


 


4





















 


then outstanding shares of
common stock of the Company (the “Outstanding Company Common Stock”) or (2) the
combined voting power of the then outstanding voting securities of the company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”) provided, however, that the following acquisitions
shall not constitute a Change of Control:


 


(A)                              any
acquisition directly from the Company,


 


(B)                                any
acquisition by the Company,


 


(C)                                any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company,


 


(D)                               any
acquisition previously approved by at least a majority of the members of the
Incumbent Board (as such term is hereinafter defined),


 


(E)                                 any
acquisition approved by at least a majority of the members of the Incumbent
Board within five business days after the Company has notice of such
acquisition,


 


(F)                                 any
acquisition by any corporation pursuant to a transaction that complies with
clauses (1) (2), and (3) of subsection (iii) of this Section 5.2,


 


(G)                                any
Person becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) (“Beneficial Owner”) of 15% or more of the
shares of Common Stock then outstanding as a result of a reduction in the
number of shares of Common Stock outstanding due to the repurchase of shares of
Common Stock by the Company unless and until such Person, after becoming aware
that such Person has become the Beneficial Owner of 15% or more of the then
outstanding shares of Common Stock, acquires beneficial ownership of additional
shares of Common Stock representing 1% or more of the shares of Common Stock
then outstanding, or


 


(H)                               any
Person who has reported or is required to report such ownership (but less than
20%) on Schedule 13G under the Exchange Act (or any comparable or
successor report) which Schedule 13G does not state any intention to or
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 of such schedule (other
than the disposition of the Common Stock) and, within 10 business days of being
requested by the Company to advise it regarding the same, certifies to the
Company that such Person acquired shares of Common Stock in excess of 14.9%
inadvertently or without knowledge of the terms of the Company’s Rights
Agreement and who or which, together with all affiliates and associates (each
as defined in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act as of the date of the Company’s Rights Agreement), thereafter does
not acquire additional shares of Common Stock while the Beneficial Owner of 15%
or more of the shares of Common Stock then outstanding; provided however, that
if the Person requested to so certify fails to do so within 10 business days,
then such acquisition shall constitute a “Change in Control”.


 


5





















 


(ii)                                  Individuals
who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, appointment or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for purposes of
this definition, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or


 


(iii)                               The
closing of a reorganization, share exchange, or merger (a “Business Combination”),
in each case, unless, following such Business Combination, (1) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination will
beneficially own, directly or indirectly, more than 70% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction will own the Company through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(2) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination) will
beneficially own, directly or indirectly, 15% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (3) at least a majority of
the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination or were elected, appointed or nominated by the
Board; or


 


(iv)                              The
closing of (1) a complete liquidation or dissolution of the Company or, (2) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following such sale
or other disposition, (A) more than 70% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) less than 15% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors will be beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation), except to the extent that such
Person owned 15% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities prior to the sale or disposition, and (C) at
least a majority of the members of the board of directors of such


 


6





















 


corporation were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such sale or other disposition of assets
of the Company or were elected, appointed or nominated by the Board.


 


5.3                                 Unforeseeable
Emergency. Any Participant, who the Committee determines has experienced
(or would experience, if a withdrawal were not permitted) an Unforeseeable
Emergency, shall be entitled to withdraw such amount from his or her Accounts
as is needed to satisfy the emergency need plus an amount necessary to pay
taxes reasonably anticipated as a result of the distribution. A Participant
shall be required to submit a written request for such a withdrawal, together
with such supporting documentation as the Committee may require, to the
Committee for review and approval. Such request may specify the Account(s)
from which the Participant wishes to make the withdrawal. If the request fails
to do so, or if the balances in the specified Account(s) are insufficient to
cover such withdrawal, then any amounts for which no designation has been made
(or which are in excess of the designated balances) shall be withdrawn from the
Participant’s Accounts, from oldest to newest, until the withdrawal amount is
satisfied. Upon the approval of a Participant’s request for such a withdrawal,
the Participant’s deferrals under the Plan shall be suspended and the
Participant shall be precluded from making further deferrals under the Plan
until the first day of the following calendar year. A distribution under this Section 5.3
shall occur as soon as administratively practicable after the Committee
approves the Participant’s request. Notwithstanding the foregoing, distribution
under this Section 5.3 may not be made to the extent that the
hardship is or may be relieved through reimbursement or compensation by
insurance or otherwise, by liquidation of the Participant’s assets (to the
extent the liquidation would not itself cause severe financial hardship) or by
cessation of deferrals under the Plan.


 


5.4                                 Payment
of Benefits Following Death.


 


(a)                                  Upon
the death of a Participant, any undistributed balances in the Participant’s
Accounts shall be distributed or commence to be distributed to the Participant’s
Beneficiary(ies) as soon as administratively practicable in the form specified
by the Participant. A Participant shall designate a Beneficiary(ies) and the
form(s) in which his or her undistributed Account balances shall be distributed
to such Beneficiary(ies) on such form (filed with the Company) as the
Administrator shall prescribe. The Participant may change a Beneficiary
designation at any time by filing a new Beneficiary designation with the
Company. Any such change shall be effective only if the Participant is alive at
the time the Company receives such change. The most recent Beneficiary
designation on file with the Company shall be controlling.


 


(b)                                 The
forms of distribution that may be designated by a Participant pursuant to
this Section 5.4 are as follows:


 


(i)                                     For
any Accounts with respect to which distributions have commenced prior to the
Participant’s death, the Participant may specify either that the form(s)
in which such Accounts are being distributed to him or her at the time of death
shall continue with respect to his or her Beneficiary(ies) or that any
undistributed Account balances shall be accelerated and distributed to such
Beneficiary(ies) in a lump sum.


 


(ii)                                  For
any Accounts with respect to which distributions have not commenced prior to
the Participant’s death, the Participant may specify that the balances in
such Accounts shall be distributed either in a lump sum, in substantially equal
annual installments over a period not to exceed five years or in such other form of
distribution as the Administrator may approve.


 


7





















 


If a Participant fails to specify in his or her Beneficiary designation
the form(s) in which his or her undistributed Account balances are to be
distributed upon his or her death, then such Account balances shall be
distributed to the Participant’s Beneficiary(ies) in a lump sum.


 


5.5                                 Distribution
in Event of Taxation. Notwithstanding any provision in the Plan to the
contrary, if the Internal Revenue Service or a court determines that any
amounts credited to a Participant’s Accounts under the Plan are currently
taxable under the Code, the Committee may, in its discretion, cause such
taxable amounts to be distributed to the Participant during the year in which
such amounts are taxable or during any subsequent year.


 


ARTICLE VI


 


ADMINISTRATION


 


6.1                                 Plan
Administration.


 


(a)                                  The
Administrator shall have and exercise all discretionary and other authority to
control and manage the operation and administration of the Plan, except such
authority as is specifically allocated otherwise by or under the terms hereof,
and shall have the power to take any action necessary or appropriate to carry
out such responsibilities. Without limiting the foregoing, and in addition to
the authority and duties specified elsewhere herein, the Administrator shall
have the discretionary authority to construe, interpret and apply the terms and
provisions of the Plan; to prescribe such rules and regulations, and issue
such directives, as it deems necessary or appropriate for the administration of
the Plan; and to make all other determinations and decisions as it deems
necessary or appropriate for the administration of the Plan. The Administrator may correct
any defect or supply any omission or reconcile any inconsistency in the Plan in
the manner and to the extent it deems expedient. Decisions of the Administrator
shall be final and binding upon the Participants, and their legal
representatives and beneficiaries.


 


(b)                                 No
Director may decide, determine or act on any matter that affects the
distribution, nature or method of settlement of solely his or her Accounts
under the Plan, except in exercising an election available to that Director in
his or her capacity as a Participant.


 


6.2                                 Claims
Procedure. A Participant or Beneficiary, as applicable, shall file any
claim for payments under the Plan with the Administrator, which shall consider
such claim and notify the claimant of its decision with respect thereto within
ninety (90) days (or within such longer period, not to exceed one hundred
eighty (180) days, as the Administrator determines is necessary to review the
claim; provided that the Administrator notifies the claimant of the extension
within the original ninety (90) day period). If the claim is denied, in whole
or in part, the claimant may appeal such denial to the Committee, provided
he or she does so within sixty (60) days of receiving the Administrator’s
determination. The Committee shall consider the appeal and notify the claimant
of its decision with respect thereto within sixty (60) days (or within such
longer period, not to exceed one hundred twenty (120) days, as the Committee
determines is necessary to review the appeal; provided that the Committee
notifies the claimant of the extension within the original sixty (60) day
period). The Committee’s decision upon any appeal shall be final and binding on
all parties.


 


6.3                                 Expenses.
All expenses and costs incurred in connection with the administration and
operation of the Plan shall be borne by the Company.


 


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ARTICLE VII


 


AMENDMENT, MODIFICATION AND TERMINATION


 


This Plan may be amended, modified or terminated at any time by
the Committee; provided, however, that no such amendment, modification or
termination may adversely affect the rights of any Participant, without
his or her consent, to any benefit under the Plan to which he or she was
entitled prior to the effective date (or, if later, the adoption date) of such
amendment, modification or termination. Notwithstanding the foregoing, the Plan
may be amended or modified in any manner necessary to comply with the
provisions of the Internal Revenue Code, as such provisions may be
modified on or after May 19, 2004. In the event of the termination of this
Plan pursuant to this ARTICLE VII, a Participant’s Accounts shall be
distributed to the Participant pursuant to ARTICLE V above.


 


ARTICLE VIII


 


MISCELLANEOUS


 


8.1                                 Unfunded
Plan. The Plan shall be unfunded and all benefits under the Plan shall be
paid solely from the Company’s general assets. The Plan constitutes a mere
promise by the Company to make benefit payments in the future. No Participant
or Beneficiary shall have any preferred claim to the amounts credited to a
Participant’s Accounts or to any assets of the Company on account of a
Participant’s participation in the Plan prior to the time such amounts are
actually paid to the Participant or Beneficiary, and then only to the extent of
any such payment. Participants and Beneficiaries shall have the status of
general unsecured creditors of the Company.


 


8.2                                 Withholding
for Taxes and Other Deductions. The Company shall have the right to deduct
from any deferral to be made or any distribution or withdrawal to be paid under
the Plan any applicable taxes that it is required by law to withhold and any
amounts owed by the Participant to the Company.


 


8.3                                 No
Right to Directorship. Nothing contained in the Plan or in any Deferral
Agreement executed by a Participant in connection herewith shall be construed
to (a) confer upon any Director any right to continue as a Director, (b) restrict
in any way the Company’s right to terminate or change the terms or conditions
of any Director’s directorship at any time, or (c) confer upon any Director
or any other person any claim or right to any distribution under the Plan
except in accordance with its terms.


 


8.4                                 No
Rights as a Stockholder. A Participant shall have no voting or any other
rights as a stockholder of the Company with respect to the Deferred
Compensation Units. Upon payment of the Deferred Compensation Units and the
transfer of shares of Common Stock to the Participant, the Participant shall
have all of the rights of a stockholder of the Company. The Participant’s right
to receive Common Stock under this Agreement shall be no greater than the right
of any unsecured general creditor of the Company.


 


8.5                                 Alienation
Prohibited. Neither the Participant nor any Beneficiary shall have any
right or ability to alienate, sell, transfer, assign, pledge or encumber,
either voluntarily or involuntarily, any amount due or expected to become due
under the Plan. Nor shall any such amounts be subject to garnishment,
execution, levy or other seizure by any creditor of a Participant or
Beneficiary.


 


8.6                                 General
Limitation of Liability. Neither the Company, the Board, the Committee, the
Administrator nor any other person shall be liable, either jointly or
severally, for any act or failure to act or for anything whatsoever in
connection with the Plan, or the administration thereof, except, and only to


 


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the extent of, liability
imposed because of willful misconduct, gross negligence or bad faith. All
benefit payments shall be made solely from the Company’s general assets.


 


8.7                                 Applicable
Law. The Plan shall be construed and its validity determined in accordance
with the laws of the State of Delaware to the extent such laws are not
preempted by federal law.


 


8.8                                 Successors
and Assigns. The terms and conditions of the Plan, as amended and in effect
from time to time, shall be binding upon the Company’s successors and assigns,
including without limitation any entity into which the Company may be
merged or with which the Company may be consolidated.


 


Dated:  May 19, 2004.


 


	
   

  	
  CIMAREX ENERGY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ F. H.
  Merelli

  	
   

  
	
   

  	
  Name:

  	
  F. H.
  Merelli

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer and President

  



 


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