Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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þ Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
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o Soliciting Material under Rule 14a-12
CROSSTEX ENERGY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1)
Title of each class of securities to which transaction applies:
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3)
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state
how it was determined):
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Fee paid previously with preliminary materials.
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which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
A special meeting of stockholders of Crosstex Energy, Inc., a Delaware corporation (the
“Company”), will be held on Thursday, October 26, 2006, at 4:00 p.m., local time, at the Company’s
offices located at 2501 Cedar Springs Rd., Dallas, Texas75201 for the following purposes:
1.
To consider and vote upon a proposal to amend the Company’s Restated
Certificate of Incorporation (a) to increase our authorized capital stock from
20,000,000 shares, consisting of 19,000,000 shares of common stock and 1,000,000 shares
of preferred stock, to 150,000,000 shares, consisting of 140,000,000 shares of common
stock and 10,000,000 shares of preferred stock, and (b) to clarify the liquidation
provision applicable to our common stock;
2.
To consider and vote upon a proposal for approval of the Crosstex Energy, Inc.
Long-Term Incentive Plan; and
3.
To transact such other business as may properly come before the meeting or any
adjournment or postponement thereof.
The Board of Directors has fixed the close of business on September 20, 2006 as the record
date for the determination of stockholders entitled to notice of and to vote at the special meeting
or any adjournment or postponement thereof. Only holders of record of shares of Common Stock of
the Company at the close of business on the record date are entitled to notice of and to vote at
the meeting.
Your vote is important. All stockholders are cordially invited to attend the meeting. We
urge you, whether or not you plan to attend the meeting, to submit your proxy by completing,
signing, dating and mailing the enclosed proxy or voting instruction card in the postage-paid
envelope provided. If a stockholder who has submitted a proxy attends the meeting in person, such
stockholder may revoke the proxy and vote in person on all matters submitted at the meeting.
By Order of the Board of Directors
Barry E. Davis
President and
Chief Executive Officer
For Special Meeting of Stockholders
To Be Held On October 26, 2006
GENERAL
This proxy statement is furnished to stockholders of Crosstex Energy, Inc. (the “Company”) in
connection with the solicitation by our board of directors (the “Board”) of proxies for use at a
special meeting of stockholders to be held at the time and place and for the purposes set forth in
the accompanying notice. The approximate date of mailing of this proxy statement and the
accompanying proxy or voting instruction card is , 2006.
Proxies and Voting Instructions
If you hold shares of common stock, par value $0.01 per share (“Common Stock”), of the Company
in your name, you can submit your proxy by completing, signing and dating your proxy card and
mailing it in the postage paid envelope provided. Proxy cards must be received by us before voting
begins at the special meeting.
If you hold shares of Common Stock through someone else, such as a bank, broker or other
nominee, you may get material from them asking you how you want to vote your shares.
You may revoke your proxy at any time prior to its exercise by:
•
Giving written notice of the revocation to our corporate secretary;
•
Appearing and voting in person at the special meeting; or
•
Properly submitting a later-dated proxy by delivering a later-dated proxy card
to our corporate secretary.
If you attend the special meeting in person without voting, this will not automatically revoke
your proxy. If you revoke your proxy during the meeting, this will not affect any vote previously
taken at the meeting. If you hold shares of Common Stock through someone else, such as a bank,
broker or other nominee, and you desire to revoke your proxy, you should follow the instructions
provided by your nominee.
Voting Procedures and Tabulation
We will appoint one or more inspectors of election to act at the special meeting and to make a
written report thereof. Prior to the special meeting, the inspectors will sign an oath to perform
their duties in an impartial manner and according to the best of their ability. The inspectors
will ascertain the number of shares of Common Stock outstanding and the voting power of each,
determine the shares of Common Stock represented at the annual meeting and the validity of proxies
and ballots, count all votes and ballots and perform certain other duties as required by law. The
determination of the inspectors as to the validity of proxies will be final and binding.
Abstentions and broker non-votes (i.e., proxies submitted by brokers that do not indicate a
vote for a proposal because they do not have discretionary voting authority and have not received
instructions as to how to vote on the proposal) are counted as present in determining whether the
quorum requirement for the special meeting is satisfied. For purposes of determining the outcome
of any matter to be voted upon as to which the broker has indicated on the proxy that the broker
does not have discretionary authority to vote, these shares will be treated as not present at the
meeting and
not entitled to vote with respect to that matter, even though those shares are considered to
be present at the meeting for quorum purposes and may be entitled to vote on other matters.
Abstentions, on the other hand, are considered to be present at the meeting and entitled to vote on
the matter abstained from.
VOTING SECURITIES
Our only outstanding voting securities are our shares of Common Stock. Only holders of record
of shares of Common Stock at the close of business on September 20, 2006, the record date for the
special meeting, are entitled to notice of and to vote at the special meeting. On the record date
for the special meeting, there were shares of Common Stock outstanding and
entitled to be voted at the special meeting. A majority of such shares, present in person or
represented by proxy, is necessary to constitute a quorum. Each share of Common Stock is entitled
to one vote.
On September 6, 2006, our Board of Directors unanimously adopted a resolution declaring it
advisable to amend the introductory paragraph and section (a) of the Fourth Article of our Restated
Certificate of Incorporation to:
(i) increase the number of shares of capital stock that we have authority to issue from
20,000,000 shares, consisting of 19,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock, par value $0.01 per share (“Preferred
Stock”), to a total of 150,000,000
shares, consisting of 140,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock; and
(ii) modify the liquidation provision applicable to our Common Stock to clarify that
the holders of our Common Stock will be entitled to receive the remaining assets of the
Company following any liquidation, dissolution or winding up of the Company, but not
following a distribution or sale of assets that does not constitute a liquidation,
dissolution or winding-up of the Company.
Our Board further directed that this amendment to our Restated Certificate of Incorporation be
submitted for consideration by our stockholders at a special meeting. If our stockholders approve
this amendment, we will amend and restate the portions of the Fourth Article of our Restated
Certificate of Incorporation necessary to make the changes described above. Following such
approval, the amendment will become effective on the date it is filed with the Secretary of State
of the State of Delaware. The amendment to the Restated Certificate of Incorporation is attached
to this proxy statement as Exhibit A.
Purpose of the Amendment
As of the record date for the special meeting, there were shares of Common
Stock outstanding and held by the Company’s stockholders and no shares of Preferred Stock
outstanding. In addition to these shares, as of the record date for the special meeting, there
were 36,258 shares of Common Stock reserved for issuance under the Company’s Long-Term
Incentive Plan.
On September 6, 2006, our Board approved, subject to approval by our stockholders of the
amendment to the Restated Certificate of Incorporation, a three-for-one stock split. The stock
split will be effected in the form of a stock dividend of two shares
of Common Stock for each outstanding share
of Common Stock. The proposed increase in the number of authorized shares of Common
Stock is necessary because the current number of authorized shares of Common Stock that are not
reserved or outstanding is not sufficient to effect this three-for-one stock split. We are
recommending that the additional shares of Common Stock be authorized in order to accommodate this
three-for-one stock split.
The three-for-one stock split is intended to place the market price of the Company’s common
stock in a range more attractive to investors, particularly individuals. The closing price of a
share of Common Stock on the Nasdaq Global Select Market was
$88.76 on September 6, 2006. In
authorizing the stock split, the Board of Directors took into account that the trading range of the
Company’s Common Stock was higher than the range of many other major corporations and believes that
the proposed split of the Company’s Common Stock will bring the shares into a more accessible
trading range, with a goal of increasing the liquidity and broadening the marketability of the
Common Stock to a larger group of investors.
If the stock split is effected, the Company’s outstanding stock options, stock purchase rights
and warrants, if any, would be proportionately adjusted such that the number of shares underlying
the Company’s outstanding stock options, stock purchase rights and warrants would be increased and
the exercise price would be proportionately reduced. The additional shares of Common Stock issued
in the stock split will be listed on the Nasdaq Global Select Market. Stockholder approval of a
stock split effected in the form of a stock dividend is not required under Delaware law, is not
being solicited by this Proxy Statement and will not be solicited in the future in order to effect
the stock split.
If the amendment to the Restated Certificate of Incorporation is not approved, we will not be
able to complete the stock split.
The additional authorized shares could also be used by the Company for business and financial
purposes as determined by the Board from time to time to be necessary or desirable. Other possible
business and financial uses for the additional shares of Common Stock and Preferred Stock include,
without limitation, future stock splits, raising
capital through the sale of Common Stock and Preferred Stock, acquiring other companies, businesses
or products in exchange for shares of Common Stock or Preferred Stock, attracting and retaining
employees by the issuance of additional securities under the Company’s various equity compensation
plans, and other transactions and corporate purposes that the Board deems are in the Company’s best
interest. The additional authorized shares would enable the Company to act quickly in response to
opportunities that may arise for these types of transactions, in most cases without the necessity
of obtaining further stockholder approval and holding a special stockholders’ meeting before such
issuance(s) could proceed, except as provided under Delaware law or under the Nasdaq Marketplace
Rules. Other than the three-for-one stock split and issuances pursuant to employee benefit plans,
as of the date of this Proxy Statement the Company has no current plans, arrangements or
understandings regarding the additional shares that would be authorized pursuant to this proposal.
However, the Company reviews and evaluates potential capital raising activities, transactions and
other corporate actions on an on-going basis to determine if such actions would be in the best
interests of the Company and its stockholders.
Possible Effects of the Amendment
Upon issuance, the additional shares of authorized Common Stock would have rights identical to
the currently outstanding shares of Common Stock. Adoption of the Amendment to the Restated
Certificate of Incorporation would not have any immediate dilutive effect on the proportionate
voting power or other rights of existing stockholders. The stock split will be effected if the
amendment to the Restated Certificate of Incorporation is approved by the stockholders and would
reduce the Company’s earnings per share but would not affect voting rights of current stockholders,
as each stockholder would continue to hold the same percentage interest in the Company. However,
to the extent that the additional authorized shares of capital stock are issued in the future
outside of the approved stock split, they may decrease existing stockholders’ percentage equity
ownership and, depending on the price at which they are issued, could be dilutive to the voting
rights of existing stockholders and have a negative effect on the market price of the Common Stock.
Current stockholders have no preemptive or similar rights, which means that current stockholders
do not have a prior right to purchase any new issue of capital stock in order to maintain their
proportionate ownership thereof.
The Company has not proposed the increase in the number of authorized shares of Common Stock
and Preferred Stock with the intention of using the additional authorized shares for anti-takeover
purposes, but the Company would be able to use the additional shares to oppose a hostile takeover
attempt or delay or prevent changes in control or management of the Company. For example, without
further stockholder approval, the Board could sell shares of capital stock in a private transaction
to purchasers who would oppose a takeover or favor the current Board. Although this proposal to
increase the authorized number of shares of capital stock has been prompted by business and
financial considerations and not by the threat of any known or threatened hostile takeover attempt,
stockholders should be aware that approval of this proposal could facilitate future efforts by the
Company to oppose changes in control of the Company and perpetuate the Company’s management,
including transactions in which the stockholders might otherwise receive a premium for their shares
over then current market prices.
The Company could also use the additional shares of capital stock for potential strategic
transactions including, among other things, acquisitions, spin-offs, strategic partnerships, joint
ventures, restructurings, divestitures, business combinations and investments, although the Company
has no present plans to do so. The Company cannot provide assurances that any such transactions
will be consummated on favorable terms or at all, that they will enhance stockholder value or that
they will not adversely affect the Company’s business or the trading price of the Common Stock.
Any such transactions may require the Company to incur non-recurring or other charges and may pose
significant integration challenges and/or management and business disruptions, any of which could
materially and adversely affect the Company’s business and financial results.
Recommendation and Required Affirmative Vote
The affirmative vote of the holders of a majority of our Common Stock entitled to vote at the
special meeting is required for approval of the proposal to amend the Restated Certificate of
Incorporation to increase the number of authorized shares of capital stock and to clarify the
liquidation provision applicable to our Common Stock. Our Board believes the Amendment to the
Restated Certificate of Incorporation is in the best interest of the Company and our stockholders.
Accordingly, our Board recommends that you vote FOR the approval of Proposal One.
PROPOSAL TWO: APPROVAL OF THE AMENDED AND RESTATED
LONG-TERM INCENTIVE PLAN
General Description of Amendment and Restatement
Our Board of Directors believes that it is important to have equity-based incentives available
to attract and retain qualified directors, employees and independent contractors who are essential
to the success of the Company and its affiliates and that it is important to link the interests and
efforts of such persons to the long-term interest of the stockholders of the Company. Accordingly,
in 2003, our Board adopted the Crosstex Energy, Inc. Long-Term Incentive Plan (as it may be amended
and restated from time to time, the “Plan”), which has been amended and restated since its initial
adoption.
As of September 1, 2006, approximately 36,258 shares of Common Stock remained available for
future issuance under the Plan to employees and directors. Therefore, on September 6, 2006,
subject to Stockholder approval, our Board increased the number of shares authorized for issuance
under the plan by 330,000 shares to an aggregate of 1,530,000 shares of Common Stock, which will
increase the number of shares available for awards to employees, contractors and directors to
366,258 shares.
In addition, on September 6, 2006, our Board approved, subject to stockholder approval, the
Amended and Restated Long-Term Incentive Plan (the “Amended and Restated Plan”). The Plan has been
amended and restated to modify certain provisions of the Plan and delete other provisions so as to
comply with Section 409A of the Internal Revenue Code. The Amended and Restated Plan (including
the increase in the number of shares authorized for issuance under
the Plan) does not give effect to the three-for-one stock split discussed under “Proposal One: Amendment of Restated Certificate of
Incorporation” and the number of shares authorized for issuance thereunder will be adjusted
accordingly upon the completion of the stock split.
The stockholders are now being requested to approve the Amended and Restated Plan and approve
the increase in the number of shares authorized for issuance under the Plan at the special meeting.
Description of the Plan
The following summary of the principal features of the Plan is qualified in its entirety by
the specific language of the Amended and Restated Plan, a copy of which is attached as Exhibit
B to this proxy statement.
General
The objectives of the Plan are to attract able persons to enter the employ of the Company, to
encourage employees to remain in the employ of the Company, to provide motivation to employees to
put forth maximum efforts toward the continued growth, profitability and success of the Company by
providing incentives to such persons through the ownership and/or performance of our Common Stock
and to attract able persons to become directors of the Company and to provide such individuals with
incentive and reward opportunities. Awards to participants under the Plan may be made in the form
of stock options or restricted stock awards.
Shares Subject to Plan
Under the Plan, a maximum of 1,200,000 shares of Common Stock may be issued to participants.
As of September 1, 2006, approximately 36,258 shares remained available under the Plan for future
issuance to participants.
As amended and restated, the Plan provides for the award of stock options and restricted stock
(collectively “Awards”) for up to 1,530,000 shares of the Company’s Common Stock. A participant
may not receive in any calendar year options relating to more than 100,000 shares of Common Stock.
The maximum number of shares set forth above are subject to appropriate adjustment in the event of
a recapitalization of the capital structure of the Company or reorganization of the Company.
Shares of Common Stock underlying Awards that are forfeited, terminated or expire unexercised
become immediately available for additional Awards under the Plan.
Administration and Eligibility
The Compensation Committee of our Board administers the Plan. The administrator has the power
to determine the terms of the options or other awards granted, including the exercise price of the
options or other awards, the number
of shares subject to each option or other award, the exercisability thereof and the form of
consideration payable upon exercise. In addition, the administrator has the authority to grant
waivers of Plan terms, conditions, restrictions and limitations, and to amend, suspend or terminate
the plan, provided that no such action may affect any share of Common Stock previously issued and
sold or any option previously granted under the plan without the consent of the holder. Awards may
be granted to employees, consultants and outside directors of the Company.
Awards
The Compensation Committee will determine the type or types of Awards made under the Plan and
will designate the individuals who are to be the recipients of Awards. Each Award may be embodied
in an agreement containing such terms, conditions and limitations as determined by the Compensation
Committee. Awards may be granted singly or in combination. Awards to participants may also be made
in combination with, in replacement of, or as alternatives to, grants or rights under the Plan or
any other employee benefit plan of the Company. All or part of an Award may be subject to
conditions established by the Compensation Committee, including continuous service with the
Company.
The types of Awards to participants that may be made under the Plan are as follows:
•
Stock Options. Stock options are rights to purchase a specified number of shares of
common stock at a specified price. An option granted pursuant to the Plan may consist
of either an incentive stock option that complies with the requirements of section 422
of the Code, or a nonqualified stock option that does not comply with such
requirements. Only employees may receive incentive stock options and such options must
have an exercise price per share that is not less than 100% of the fair market value of
the Common Stock underlying the option on the date of grant. Nonqualified stock
options also must have an exercise price per share that is not less than the fair
market value of the common stock underlying the option on the date of grant. The
exercise price of an option must be paid in full at the time an option is exercised.
•
Restricted Stock Awards. Stock awards consist of restricted shares of Common Stock
of the Company. The Compensation Committee will determine the terms, conditions and
limitations applicable to any restricted stock awards. Rights to dividends or dividend
equivalents may be extended to and made part of any stock award at the discretion of
the Compensation Committee. Restricted stock awards will have a vesting period
established in the sole discretion of the Compensation Committee, provided that the
Compensation Committee may provide for earlier vesting by reason of death, disability,
retirement or otherwise.
In the event of a “change of control” of the Company as defined in the Plan, all Awards
automatically vest and become exercisable and vesting periods with respect to restricted stock will
terminate.
Other Provisions
Our Board may amend, modify, suspend or terminate the Plan for the purpose of addressing any
changes in legal requirements or for any other purpose permitted by law, except that no amendment
that would impair the rights of any participant to any Award may be made without the consent of
such participant, and no amendment requiring stockholder approval under any applicable legal
requirements will be effective until such approval has been obtained. No incentive stock options
may be granted after the tenth anniversary of the effective date of the Plan.
In the event of any corporate transaction such as a merger, consolidation, reorganization,
recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off
or other distribution of stock or property of the Company, the Board shall substitute or adjust, as
applicable: (i) the number of shares of Common Stock reserved under this Plan and the number of
shares of Common Stock available for issuance pursuant to specific types of Awards as described in
the Plan, (ii) the number of shares of Common Stock covered by outstanding Awards, (iii) the grant
price or other price in respect of such Awards and (iv) the appropriate fair market value and other
price determinations for such Awards, in order to reflect such transactions, provided that such
adjustments shall only be such that are necessary to maintain the proportionate interest of the
holders of Awards and preserve, without increasing, the value of such Awards.
Because the granting of Awards under the Plan is at the discretion of the Compensation
Committee, it is not now possible to determine which persons (including directors, officers,
consultants and employees of the Company) may be granted Awards. Also, it is not now possible to
estimate the number of shares of Common Stock that may be awarded.
U.S. Federal Income Tax Consequences
The following is a general discussion of the current Federal income tax consequences of Awards
under the Plan to participants who are classified as United States residents for Federal income tax
purposes. Different or additional rules may apply to participants who are subject to income tax in
a foreign jurisdiction and/or are subject to state or local income tax in the United States. Each
participant should rely on his or her own tax advisers regarding Federal income tax treatment under
the Plan.
Stock Options
The grant of a nonqualified stock option will not result in taxable income to the participant
and the Company will not be entitled to an income tax deduction. Upon the exercise of a
nonqualified stock option, a participant will realize ordinary taxable income on the date of
exercise. Such taxable income will equal the difference between the option price and the fair
market value of the Common Stock underlying the option on the date of exercise. The Company will be
entitled to an income tax deduction equal to the amount included in the participant’s ordinary
income.
Upon the grant or exercise of an incentive stock option, a participant will not recognize
taxable income and the Company will not be entitled to an income tax deduction. However, the
exercise of an incentive stock option will result in an item of income for purposes of
the “alternative minimum tax” in an amount equal to the excess of the fair market value of the
common stock underlying the incentive stock option at the time of exercise over the option price.
The optionee will recognize taxable income in the year in which the shares of common stock
underlying the incentive stock option are sold. Dispositions are divided into two categories:
qualifying and disqualifying. A qualifying disposition occurs if the sale or disposition is made
more than two years from the option grant date and more than one year from the exercise date. If
the participant sells or disposes of the shares of common stock in a qualifying disposition, any
gain recognized by the participant on such sale or disposition will be a long-term capital gain,
and the Company will not be entitled to an income tax deduction.
If
either of the two holding periods described above is not satisfied, then a disqualifying
disposition will occur. If the optionee makes a disqualifying disposition of the shares of common
stock that have been acquired through the exercise of the option, the
optionee will include as ordinary income and the Company will be entitled to
an income tax deduction for the taxable year in which the sale or
disposition occurs an amount equal to the
lesser of: (a) the excess of the fair market value of such shares on the option exercise date over
the exercise price paid for the shares or (b) the amount realized on the sale or disposition over
the exercise price paid for the shares.
Restricted Stock
The grant of restricted stock does not result in taxable income to the participant. At each
vesting event, the participant will recognize taxable ordinary income equal to the excess of the
fair market value of the shares of Common Stock that become vested over the exercise price (if any)
paid for such Common Stock. However, if a participant makes a timely election under section 83(b)
of the Code, the participant will recognize taxable ordinary income in the taxable year of the
grant equal to the excess of the fair market value of the shares of Common Stock underlying the
restricted stock award at the time of grant over the exercise price (if any) paid for such Common
Stock. Furthermore, the participant will not recognize ordinary income on such restricted stock
when it subsequently vests.
In all cases, the participant’s ordinary income is subject to applicable withholding taxes.
The Company will be allowed an income tax deduction in the taxable year the participant recognizes
ordinary income, in an amount equal to such ordinary income.
Section 409A
On October 22, 2004, President Bush signed the American Jobs Creation Act of 2004. The Jobs
Creation Act dramatically alters the tax law relating to nonqualified deferred compensation
arrangements, through the creation of the new Code Section 409A, and imposes significant penalties
for noncompliance. Specifically, if the deferred compensation arrangement does not comply with
Code Section 409A, the deferred amounts will be taxed currently at the participant’s marginal rate,
interest is assessed at the underpayment rate established by the IRS plus 1%, measured from
the later of the deferral date or vesting date, and a penalty is assessed equal to 20% of the
taxable amount of compensation. In accordance with recent IRS guidance interpreting Section 409A,
the Plan will be administered in a manner that is in good faith compliance with Section 409A. The
Board intends that any Awards under the Plan satisfy the applicable requirements of Section 409A.
Generally, Section 409A is inapplicable to incentive stock options and restricted stock and also to
nonqualified stock options so long as the exercise price for the nonqualified option may never be
less than the fair market value of the Common Stock on the grant date.
Recommendation and Required Affirmative Vote
The affirmative vote of the holders of a majority of our Common Stock entitled to vote and who
do vote (in person or by proxy) at the special meeting is required for approval of the proposal to
adopt the Amended and Restated Plan. Our Board believes that the Amended and Restated Plan is in
the best interests of the Company and our stockholders. Accordingly, our Board recommends that you
vote FOR approval of Proposal Two.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of shares of our Common Stock as of
September 1, 2006, held by:
•
Each person who beneficially owns 5% or more of the shares of Common Stock then outstanding;
•
all of our directors;
•
each of our named executive officers; and
•
all of our directors and executive officers as a group.
The information contained in this table reflects “beneficial ownership” as defined in Rule
13d-3 of the Securities Exchange Act of 1934, as amended. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person, shares of Common Stock
subject to options, if any, held by that person that were exercisable on September 1, 2006 or would
be exercisable within 60 days following September 1, 2006 are considered outstanding. However, such
shares are not considered outstanding for the purpose of computing the percentage ownership of any
other person. To our knowledge and unless otherwise indicated, each stockholder has sole voting
and investment power over the shares listed as beneficially owned by such stockholder, subject to
community property laws where applicable. Percentage of ownership is based on 15,313,729 shares of
Common Stock outstanding as of September 1, 2006.
All directors and executive officers as a group (13 persons)
1,692,951
11.06
%
*
Less than 1%.
(1)
The address of each person listed above is 2501 Cedar Springs, Dallas, Texas75201, except
for (a) Mr. Lawrence, Yorktown Energy Partners IV, L.P. and Yorktown Energy Partners V, L.P.,
which is 410 Park Avenue, New York, New York10022 and (b) Chieftain Capital Management, Inc.,
which is 12 East 49th Street, New York, New York10017.
(2)
As agent and attorney-in-fact for the purchasers who are its clients under separate
investment advisor agreements.
(3)
As reported on a Form 4 filed with the SEC on August 14, 2006 by Yorktown Energy Partners IV,
L.P.
(4)
As reported on a Form 4 filed with the SEC on August 14, 2006 by Yorktown Energy Partners V,
L.P.
Sheldon B. Lubar is (i) a general partner of Lubar Nominees and (ii) a director and Chairman
of the Board of Lubar & Co., Incorporated, which serves as the manager of Lubar Equity Fund,
LLC. As a result of these relationships, Mr. Lubar may be deemed to beneficially own the
shares held by Lubar Nominees and Lubar Equity Fund, LLC.
(6)
Includes 5,000 shares held by Burke, Mayborn Co. Ltd. Mr. Burke is a general partner of
Burke, Mayborn Co. Ltd.
(7)
Bryan H. Lawrence is a member and a manager of the general partner of both Yorktown Energy
Partners IV, L.P. and Yorktown Energy Partners V, L.P.
(8)
Includes 42,500 shares held by Murchison Capital Partners, L.P. Mr. Murchison is the
President of the Murchison Management Corp., which serves as the general partner of Murchison
Capital Partners, L.P.
EXECUTIVE COMPENSATION
The following report of the Compensation Committee
shall not be deemed to be “soliciting material” or to be “filed”
with the SEC or subject to the SEC’s proxy rules, except for the required disclosure herein, or to
the liabilities of Section 18 of the Exchange Act of 1934, as amended (“Exchange Act”), and such
information shall not be deemed to be incorporated by reference into any filing made by us under
the Securities Act of 1933 or the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following statement is furnished by the Compensation Committee of Crosstex Energy, Inc.
and is not incorporated by reference into any document that we file with the SEC.
The Compensation Committee of the Board of Directors presents this report to describe the
compensation procedures it applied with regard to the compensation of the Company’s executive
officers for fiscal 2005, and the basis for the compensation of Mr. Barry E. Davis, who served as
the Company’s President and Chief Executive Officer during fiscal 2005.
Each year the Compensation Committee reviews management’s recommendations as to salary, bonus
and long-term stock based compensation for the upcoming year. Salaries for the Company’s employees
are generally determined by considering the employee’s performance and prevailing levels of
compensation in areas in which a particular employee works. Bonuses for employees are generally
based on return on invested capital (“ROI”), bottom-line profitability, customer satisfaction,
overall company growth, corporate governance, adherence to policies and procedures and other
factors that vary depending on an employee’s responsibilities (the “Company’s Bonus Program”). The
long-term compensation structure is intended to align the performance of the Company’s employees
with long-term performance for its stockholders.
The Compensation Committee reviews in greater depth the compensation of the Chief Executive
Officer and the most highly paid executive officers. This review includes proposed salaries,
bonuses and long-term, stock-based compensation. The Compensation Committee has engaged an
independent consulting firm to conduct a study of the Company’s program for compensating its senior
executives, including the Chief Executive Officer. This study compares the Company’s compensation
levels both with that of other members of the Company’s industry peer group and with that of
companies with similar revenues and earnings. The study analyzed salaries, bonuses and long-term,
stock based compensation. The Compensation Committee considered the results of this study as part
of its determination as to what it believed would be a fair compensation program in view of the
Company’s earnings, returns and other corporate goals.
At a meeting in November 2005, the Compensation Committee reviewed Mr. Davis’s compensation
and determined that he should receive an annual salary of $390,000. The Compensation Committee
discussed the contributions Mr. Davis has made as the Company’s President and Chief Executive
Officer, and his expected future contributions. The Compensation Committee decided that, as in past
years, Mr. Davis’s bonus should be based upon a formula that is tied to the ROI that is achieved by
the Company during the fiscal period in accordance with the Company’s Bonus Program. Under the
program, if a predetermined ROI is accomplished then the bonus will be paid and it will be
increased or decreased based upon such ROI percentage, with minimum and maximum payouts. During
2005, this formula resulted in Mr. Davis receiving a bonus of $360,000. For fiscal 2006, the
Compensation Committee contemplates continuing the Company’s Bonus Program. Mr. Davis also received
a restricted stock grant in 2005 of
10,000 shares. The Compensation Committee contemplates making a similar grant during fiscal 2006,
but the final number of shares to be granted has not been determined as of the date of this report.
Also at the meeting in November 2005, the Compensation Committee reviewed in detail and
approved the management recommendations regarding compensation of the Company’s four most highly
paid executive officers in addition to Mr. Davis. Specifically, the Compensation Committee approved
annual salaries in the amount of $275,000 each for A. Chris Aulds, James R. Wales, William W. Davis
and Jack M. Lafield. In addition, these individuals received bonuses for fiscal 2005 in the amounts
of $172,500, $172,500, $217,500, and $217,500, respectively, each based upon the Company’s Bonus
Program. For fiscal 2006, the Compensation Committee contemplates continuing the Company’s Bonus
Program. Also, these individuals received restricted stock grants during 2005 totaling 50,222
shares of the Company’s stock. As with respect to Mr. Barry E. Davis, the Compensation Committee
contemplates making a similar grant during fiscal 2006, but the final number of shares to be
granted has not been determined as of the date of this report.
Submitted by the Compensation Committee of the Board
Sheldon B. Lubar (chair)
Robert F. Murchison
Summary Compensation Table
The following table shows the compensation of our Chief Executive Officer and each of our
other executive officers (collectively, the “named executive officers”). Such compensation is for
service to us and to the Partnership. See the Report of the Compensation Committee on Executive
Compensation for an explanation of our compensation policies and programs.
Executive officers received equity-based awards from the Partnership’s general partner
in 2003 and 2005 and from us in 2004 and 2005. For a description of awards granted to date
under the Long-Term Incentive Plan, See “- Long-Term Incentive Plan.”
There were no stock options granted to the named executive officers in 2005.
Option Exercises and Year-End Option Values
The following table provides information about the number of shares issued upon option
exercises by the named executive officers during 2005, and the value realized by the named
executive officers. The table also provides information about the number and value of options that
were held by the named executive officers at December 31, 2005.
Aggregated Option Exercise in Last Fiscal Year
and Fiscal Year End Option Values
The closing price for the Common Stock was $63.06 at December 31, 2005.
Crosstex Energy, L.P. The following table provides information about the number of units
issued upon option exercises by the named executive officers of Crosstex Energy, L.P. (the
“Partnership”) during 2005 and the value realized by such named executive officers. The table also
provides information about the number and value of options that were held by the named executive
officers at December 31, 2005.
Aggregated Option Exercise in Last Fiscal Year
and Fiscal Year End Option Values
The following table provides information as of December 31, 2005 regarding shares of our
Common Stock that may be issued under our existing equity compensation plans:
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to be
Equity Compensation
Issued Upon Exercise of
Weighted-Average Price Of
Plans (Excluding Securities
Outstanding Options,
Outstanding Options,
Reflected In Column
Plan Category
Warrants, And Rights (a)
Warrants And Rights (b)
(a)) (c)
Equity Compensation
Plans Approved By
Security Holders
(1)
263,169
(2)
$
30.99
(3)
88,441
Equity Compensation
Plans Not Approved
By Security Holders
N/A
N/A
N/A
(1)
Our Long-Term Incentive Plan for our officers, employees and directors was approved by our
security holders prior to our initial public offering.
(2)
The number of securities includes 196,547 restricted shares that have been granted under our
Long-Term Incentive Plan that have not been vested, but does not include the 330,000 share
increase under our Amended and Restated Plan that is subject to shareholder approval at the
special meeting.
(3)
The strike prices for outstanding options under the plan as of December 31, 2005 range from
$19.50 to $41.85 per share.
Long-Term Incentive Plan
The Crosstex Energy, Inc. Long-Term Incentive Plan and the proposed amendment and restatement
of such Plan are described in detail above under “Proposal Two: Approval of Amended and Restated
Long-Term Incentive Plan.”
Employment Agreements
Our executive officers, including Barry E. Davis, James R. Wales, A. Chris Aulds, Jack M.
Lafield and William W. Davis, have entered into employment agreements with Crosstex Energy GP, LLC.
The following is a summary of the material provisions of those employment agreements. All of these
employment agreements are substantially similar, with certain exceptions as set forth below.
Each of the employment agreements has a term of one year that will automatically be extended
such that the remaining term will not be less than one year. The employment agreements provide for
a base annual salary of $390,000, $275,000, $275,000, $275,000 and $275,000 for Barry E. Davis,
James R. Wales, A. Chris Aulds, Jack M. Lafield and William W. Davis, respectively, as of January1, 2006.
Except in the event of Crosstex Energy GP, LLC becoming bankrupt or ceasing operations,
termination for cause or termination by the employee other than for good reason, the employment
agreements provide for continued salary payments, bonus and benefits following termination of
employment for the remainder of the employment term under the agreement. If a change in control
occurs during the term of an employee’s employment and either party to the agreement terminates the
employee’s employment as a result thereof, the employee will be entitled to receive salary
payments, bonus and benefits following termination of employment for the remainder of the
employment term under the agreement.
The employment agreements also provide for a noncompetition period that will continue until
the later of one year after the termination of the employee’s employment or the date on which the
employee is no longer entitled to receive severance payments under the employment agreement. During
the noncompetition period, the employees are generally prohibited from engaging in any business
that competes with the Partnership or its affiliates in areas in which the Partnership conducts
business as of the date of termination and from soliciting or inducing any employees to terminate
their employment with the Partnership or its affiliates or accept employment with anyone else or
interfere in a similar manner with the business of the Partnership.
Any proposal by a stockholder intended to be presented at the 2007 annual meeting of
stockholders must be received by us at our principal executive offices at 2501 Cedar Springs Road,
Dallas, Texas, 75201, Attention: Corporate Secretary, no later than December 8, 2006, for inclusion
in our proxy materials relating to that meeting.
In order for a stockholder to bring other business before an annual meeting of stockholders,
timely notice must be received in proper written form by our Corporate Secretary. To be timely,
notice by a stockholder must be delivered to or mailed and received at our principal executive
offices not less than 120 days prior to the one year anniversary of the date of our proxy statement
issued in connection with the prior year’s annual meeting, and not less than 60 days prior to the
meeting. To be in proper written form, notice by a stockholder to our Corporate Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual meeting (i) a
description of the business desired to be brought before the meeting, (ii) the name and address of
the stockholder proposing such business and of the beneficial owner, if any, on whose behalf the
business is being brought, (iii) the class, series and number of shares of us which are
beneficially owned by the stockholder and such other beneficial owner, (iv) any material interest
of the stockholder and such other beneficial owner in such business and (v) a representation that
such stockholder intends to appear in person or by proxy at the annual or special meeting to bring
such business before such meeting.
Solicitation of Proxies
The cost of the solicitation of proxies will be paid by us. In addition to solicitation by
mail, our directors, officers and employees may also solicit proxies from stockholders by
telephone, facsimile, electronic mail or in person. We will also make arrangements with brokerage
houses and other custodians, nominees and fiduciaries to send the proxy materials to beneficial
owners. Upon request, we will reimburse those brokerage houses and custodians for their reasonable
expenses in so doing.
CROSSTEX ENERGY, INC.
Barry E. Davis
President and
Chief Executive Officer
The proposal is to amend the introductory paragraph and section (a) of the Fourth Article of
the Restated Certificate of Incorporation of Crosstex Energy, Inc. to read as follows:
“ FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 150,000,000 shares, consisting solely of (i)
140,000,000 shares of Common Stock, par value $0.01 per share (the “Common Stock”), and (ii)
10,000,000 shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”).
The following is a statement of the designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions thereof, of the classes of stock
of the Corporation:
(a) Common Stock.
(i) Dividends. After the requirements with respect to preferential dividends on
Preferred Stock, if any, shall have been met and after the Corporation shall have complied
with all the requirements, if any, with respect to the setting aside of sums as sinking
funds or redemption or purchase accounts and subject further to any other conditions which
may be fixed in accordance with the provisions of this Certificate of Incorporation, then,
but not otherwise, the holders of the Common Stock shall be entitled to receive such
dividends, if any, as may be declared from time to time by the Board of Directors on the
Common Stock, which dividends shall be paid out of assets legally available for the payment
of dividends and shall be distributed among the holders of shares of the Common Stock pro
rata in accordance with the number of shares of such stock held by each such holder.
(ii) Liquidation. After distribution in full of the preferential amount, if any, to be
distributed to the holders of Preferred Stock in the event of voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to stockholders, which assets shall
be distributed pro rata in accordance with the number of shares of such stock held by each
such holder.
(iii) Voting. Except as may otherwise be required by law or the provisions of the
resolution or resolutions as may be adopted by the Board of Directors pursuant to subsection
(b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of
each share of Common Stock held by such holder on each matter voted upon by the
stockholders.”
CROSSTEX ENERGY, INC.
LONG-TERM INCENTIVE PLAN
(Amended and Restated Effective as of September 6, 2006)
ARTICLE I. ESTABLISHMENT AND PURPOSE
1.1 Establishment. The Crosstex Energy, Inc. Long-Term Incentive Plan (the “Plan”) was originally
approved by the Board of Directors of Crosstex Energy, Inc., a Delaware corporation, to be
effective December 31, 2003. In furtherance of the purposes of said plan and in order to amend
said plan in certain respects, the plan is hereby amended and restated in its entirety as set forth
in this document.
1.2 Purpose. The purposes of the Plan are to attract able persons to enter the employ of the Company,
to encourage Employees to remain in the employ of the Company and to provide motivation to
Employees to put forth maximum efforts toward the continued growth, profitability and success of
the Company, by providing incentives to such persons through the ownership and/or performance of
the Common Stock of Crosstex. A further purpose of the Plan is to provide a means through which
the Company may attract able persons to become directors of the Company and to provide such
individuals with incentive and reward opportunities. Toward these objectives, Awards may be
granted under the Plan to Employees and Outside Directors on the terms and subject to the
conditions set forth in the Plan.
1.3 Effectiveness. This amended and restated Plan shall become effective as of September 6, 2006,
following its adoption by the Board, provided it is duly approved by the holders of at least a
majority of the shares of Common Stock present or represented and entitled to vote at a meeting of
the stockholders of Crosstex duly held in accordance with applicable law within twelve months after
the date of adoption of the Plan by the Board. If the amended and restated Plan is not so
approved, the amended and restated Plan shall not be effective, any Award granted under the amended
and restated Plan shall be null and void, and the Plan as in effect prior to its amendment (and
grants made under said plan) shall remain in full force and effect.
ARTICLE II. DEFINITIONS
2.1 Affiliate. “Affiliate” means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or is under common control
with, the Person in question. As used herein, the term “control” means the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise. With respect to an
Incentive Stock Option, “Affiliate” means a “parent corporation” or a “subsidiary corporation” of
Crosstex, as those terms are defined in Section 424(e) and (f) of the Code.
2.2 Award. “Award” means an award granted to a Participant in the form of an Option or Restricted
Stock. All Awards shall be granted by, confirmed by, and subject to the terms of, an Award
Agreement.
2.3 Award Agreement. “Award Agreement” means a written agreement between Crosstex and a Participant
that sets forth the terms, conditions, restrictions and/or limitations applicable to an Award.
2.4 Board. “Board” means the Board of Directors of Crosstex.
2.5 Cause. “Cause” means (i) Participant has failed to perform the duties assigned to him and such
failure has continued for thirty (30) days following delivery by the Company of written notice to
Participant of such failure, (ii) Participant has been convicted of a felony or misdemeanor
involving moral turpitude, (iii) Participant has engaged in acts or omissions against the Company
constituting dishonesty, breach of fiduciary obligation, or intentional wrongdoing or misfeasance
or (iv) Participant has acted intentionally or in bad faith in a manner that results in a material
detriment to the assets, business or prospects of the Company.
2.6 Change of Control. “Change of Control” shall have the meaning set forth in Section 9.1.
2.7 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time, including
regulations thereunder and successor provisions and regulations thereto.
2.8 Committee. “Committee” means (i) with respect to the application of this Plan to Employees, the
Compensation Committee of the Board or such other committee of the Board as may be designated by
the Board to administer the Plan, which committee shall consist of two or more non-employee
directors, each of whom is both a “non-employee director” under Rule 16b-3 of the Exchange Act and
an “outside director” under Section 162(m) of the Code, and (ii) with respect to the application of
this Plan to an Outside Director, the Board. To the extent that no Committee exists that has the
authority to administer the Plan, the functions of the Committee shall be exercised by the Board.
If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 or Section
162(m) of the Code, such noncompliance with such requirements shall not affect the validity of
Awards, grants, interpretations or other actions of the Committee.
2.9 Common Stock. “Common Stock” means the common stock, $.01 par value per share, of Crosstex, or any
stock or other securities of Crosstex hereafter issued or issuable in substitution or exchange for
the Common Stock.
2.10 Company. “Company” means Crosstex and its Affiliates.
2.11
Consultant. “Consultant” means an individual performing services for Crosstex or an Affiliate who is treated
for tax purposes as an independent contractor at the time of performance of the services.
2.12 Crosstex. “Crosstex” means Crosstex Energy, Inc., a Delaware corporation, or any successor
thereto.
2.13 Effective Date. “Effective Date” means the date this amended and restated Plan becomes effective
as provided in Section 1.3.
2.14 Employee. “Employee” means an employee of the Company; provided, however, that the term Employee
does not include an Outside Director or a Consultant.
2.15 Exchange Act. “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.16
Fair Market Value. “Fair Market Value” means the closing sales price of a share of Common Stock on
the applicable date (or if there is no trading in the Common Stock on such date, on the next
preceding date on which there was trading) as reported in The Wall Street Journal (or other
reporting service approved by the Committee). In the event the Common Stock is not publicly traded
at the time a
determination of fair market value is required to be made hereunder, the
determination of fair market value shall be made in good faith by the Committee.
2.17 Grant Date. “Grant Date” means the date an Award is granted by the Committee.
2.18 Incentive Stock Option. “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422(b) of the Code.
2.19 Nonqualified Stock Option. “Nonqualified Stock Option” means an Option that is not an Incentive
Stock Option.
2.20 Option. “Option” means an option to purchase shares of Common Stock granted to a Participant
pursuant to Article VII. An Option may be either an Incentive Stock Option or a Nonqualified Stock
Option, as determined by the Committee.
2.21 Outside Director. “Outside Director” means a “non-employee director” of the Company, as defined in
Rule 16b-3.
2.22 Participant. “Participant” means an Employee, Consultant or Outside Director to whom an Award has
been granted under the Plan.
2.23 Person. “Person” means an individual or a corporation, limited liability company, partnership,
joint venture, trust, unincorporated organization, association, government agency or political
subdivision thereof or other entity.
2.24 Plan. “Plan” means this Crosstex Energy, Inc. Long-Term Incentive Plan, as amended from time to
time.
2.25 Restricted Stock. “Restricted Stock” means shares of Common Stock granted to a Participant
pursuant to Article VIII, which are subject to such restrictions as may be determined by the
Committee. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all
corporate purposes.
2.26 Restriction Period. “Restriction Period” means the period of time established by the Committee at
the time of a grant of Restricted Stock during which the Restricted Stock shall be fully or
partially forfeitable.
2.27 Rule 16b-3. “Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time.
ARTICLE III. PLAN ADMINISTRATION
3.1 Plan Administrator. The Plan shall be administered by the Committee. The Committee may delegate
some or all of its power to the Chief Executive Officer or other executive officer of the Company
as the Committee deems appropriate; provided, that (i) the Committee may not delegate its power
with regard to the grant of an Award to any person who is a “covered employee” within the meaning
of Section 162(m) of the Code or who, in the Committee’s judgment, is likely to be a covered
employee at any time during the period an Award to such employee would be outstanding, and (ii) the
Committee may not delegate its power with regard to the selection for participation in the Plan of
an officer or other person subject to Section 16 of the Exchange Act or decisions concerning the
timing, pricing or amount of an Award to such an officer or other person.
3.2 Authority of Administrator. The Committee shall have total and exclusive responsibility to
control, operate, manage and administer the Plan in accordance with its terms. The Committee shall
have all the authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan. Without limiting the generality of the preceding
sentence, but subject to the limitation that none of the enumerated powers of the Committee shall
be deemed to include any action that would cause a tax to be imposed on a
Participant pursuant to section 409A of the Code, the Committee shall have the exclusive right to:
(i) interpret the Plan and the Award Agreements executed hereunder; (ii) determine eligibility for
participation in the Plan; (iii) decide all questions concerning eligibility for, and the amount
of, Awards granted under the Plan; (iv) construe any ambiguous provision of the Plan or any Award
Agreement; (v) prescribe the form of the Award Agreements embodying Awards granted under the Plan;
(vi) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any
Award Agreement; (vii) issue administrative guidelines as an aid to administering the Plan and make
changes in such guidelines as the Committee from time to time deems proper; (viii) make regulations
for carrying out the Plan and make changes in such regulations as the Committee from time to time
deems proper; (ix) determine whether Awards should be granted singly or in combination; (x) to the
extent permitted under the Plan, grant waivers of Plan terms, conditions, restrictions and
limitations; (xi) accelerate the exercise, vesting or payment of an Award when such action or
actions would be in the best interests of the Company; (xii) grant Awards in replacement of Awards
previously granted under the Plan or any other employee benefit plan of the Company; and (xiii)
take any and all other actions the Committee deems necessary or advisable for the proper operation
or administration of the Plan.
3.3 Discretionary Authority. The Committee shall have full discretionary authority in all matters
related to the discharge of its responsibilities and the exercise of its authority under the Plan,
including, without limitation, its construction of the terms of the Plan and its determination of
eligibility for participation and Awards under the Plan. The decisions of the Committee and its
actions with respect to the Plan shall be final, conclusive and binding on all persons having or
claiming to have any right or interest in or under the Plan, including Participants and their
respective estates, beneficiaries and legal representatives.
3.4 Liability; Indemnification. No member of the Committee nor any person to whom authority has been
delegated, shall be personally liable for any action, interpretation or determination made in good
faith with respect to the Plan or Awards granted hereunder, and each member of the Committee (or
delegatee of the Committee) shall be fully indemnified and protected by Crosstex with respect to
any liability he or she may incur with respect to any such action, interpretation or determination,
to the extent permitted by applicable law.
ARTICLE IV. SHARES SUBJECT TO THE PLAN
4.1 Available Shares. The maximum number of shares of Common Stock that shall be available for grant
of Awards under the Plan shall not exceed a total of 1,530,000, subject to adjustment as provided
in Sections 4.2 and 4.3; provided, however, the maximum number of shares of Common Stock for which
Options may be granted under the Plan to any one Participant during a calendar year is 100,000.
Shares of Common Stock issued pursuant to the Plan may be shares of original issuance or treasury
shares or a combination of the foregoing, as the Committee, in its absolute discretion, shall from
time to time determine.
4.2 Adjustments for Recapitalizations and Reorganizations.
(a) The shares with respect to which Awards may be granted under the Plan are shares of
Common Stock as presently constituted, but if, and whenever, prior to the expiration or
satisfaction of an Award theretofore granted, Crosstex shall effect a subdivision or
consolidation of shares of Common Stock or the payment of a stock dividend on Common Stock
in the form of Crosstex Common Stock without receipt of consideration by Crosstex, the
number of shares of
Common Stock with respect to which such Award may thereafter be exercised or satisfied, as
applicable, (i) in the event of an increase in the number of outstanding shares, shall be
proportionately increased, and the exercise price per share shall be proportionately
reduced, and (ii) in the event of a reduction in the number of outstanding shares, shall be
proportionately reduced, and the exercise price per share shall be proportionately
increased.
(b) If Crosstex recapitalizes or otherwise changes its capital structure, thereafter
upon any exercise or satisfaction, as applicable, of an Award theretofore granted the
Participant shall be entitled to (or entitled to purchase, if applicable) under such Award,
in lieu of the number of shares of Common Stock then covered by such Award, the number and
class of shares of stock or other securities to which the Participant would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to such
recapitalization, the Participant had been the holder of record of the number of shares of
Common Stock then covered by such Award.
(c) In the event of changes in the outstanding Common Stock by reason of a
reorganization, merger, consolidation, combination, separation (including a spin-off or
other distribution of stock or property), exchange, or other relevant change in
capitalization occurring after the date of grant of any Award and not otherwise provided for
by this Section 4.2, any outstanding Awards and any Award Agreements evidencing such Awards
shall be subject to adjustment by the Committee in its absolute discretion as to the number,
price and kind of shares or other consideration subject to, and other terms of, such Awards
to reflect such changes in the outstanding Common Stock.
(d) In the event of any changes in the outstanding Common Stock provided for in this
Section 4.2, the aggregate number of shares available for grant of Awards under the Plan may
be equitably adjusted by the Committee, whose determination shall be conclusive. Any
adjustment provided for in this Section 4.2 shall be subject to any required stockholder
action.
4.3 Adjustments for Awards. The Committee shall have full discretion to determine the manner in which
shares of Common Stock available for grant of Awards under the Plan are counted. Without limiting
the discretion of the Committee under this Section 4.3, unless otherwise determined by the
Committee, the following rules shall apply for the purpose of determining the number of shares of
Common Stock available for grant of Awards under the Plan:
(a) Options and Restricted Stock. The grant of Options and Restricted Stock shall
reduce the number of shares available for grant of Awards under the
Plan by the number of shares subject to such Award.
(b) Termination. If any Award referred to in paragraph (a) above is canceled or
forfeited, or terminates, expires or lapses for any reason, the shares then subject to such
Award shall again be available for grant of Awards under the Plan.
(c) Payment of Exercise Price and Withholding Taxes. If previously acquired shares of
Common Stock are used to pay the exercise price of an Award, the number of shares available
for grant of Awards under the Plan shall not be increased by the number of shares delivered
as payment of such exercise price. If previously acquired shares of Common Stock are used
to pay withholding taxes payable upon exercise, vesting or payment of an Award, or shares
of
Common Stock that would be acquired upon exercise, vesting or payment of an Award are
withheld to pay withholding taxes payable upon exercise, vesting or payment of such Award,
the
number of shares available for grant of Awards under the Plan shall not be increased by
the number of shares delivered or withheld as payment of such withholding taxes.
(d) Fractional Shares. If any such adjustment would result in a fractional security
being (i) available under the Plan, such fractional security shall be disregarded or (ii)
subject to an Award, Crosstex shall pay the holder of such Award, in connection with the
first vesting, exercise or settlement of such Award in whole or in part occurring after such
adjustment, an amount in cash determined by multiplying (x) the fraction of such security
(rounded to the nearest hundredth) by (y) the excess, if any, of the Fair Market Value on
the vesting, exercise or settlement date over the exercise price, if any, of such Award.
ARTICLE V. V. ELIGIBILITY
All Employees, Consultants and Outside Directors are eligible to participate in the Plan. The
Committee shall recommend, from time to time, Participants from those Employees, Consultants and
Outside Directors who, in the opinion of the Committee, can further the Plan purposes. Once a
Participant is recommended for an Award by the Committee, the Committee shall determine the type
and size of Award to be granted to the Participant and shall establish in the related Award
Agreement the terms, conditions, restrictions and/or limitations applicable to the Award, in
addition to those set forth in the Plan and the administrative rules and regulations, if any,
established by the Committee.
ARTICLE VI. FORM OF AWARDS
Awards may, at the Committee’s sole discretion, be granted under the Plan in the form of
Options pursuant to Article VII or Restricted Stock pursuant to Article VIII or a combination
thereof. All Awards shall be subject to the terms, conditions, restrictions and limitations of the
Plan. The Committee may, in its absolute discretion, subject any Award to such other terms,
conditions, restrictions and/or limitations (including, but not limited to, the time and conditions
of exercise, vesting or payment of an Award and restrictions on transferability of any shares of
Common Stock issued or delivered pursuant to an Award), provided they are not inconsistent with the
terms of the Plan. Awards under a particular Article of the Plan need not be uniform, and Awards
under more than one Article of the Plan may be combined into a single Award Agreement. Any
combination of Awards may be granted at one time and on more than one occasion to the same
Participant.
ARTICLE VII. OPTIONS
7.1 General. Awards may be granted to Employees, Consultants and Outside Directors in the form of
Options. Options granted under the Plan may be Incentive Stock Options or Nonqualified Stock
Options, or a combination of both; provided, however, that Incentive Stock Options may be granted
only to Employees.
7.2 Terms and Conditions of Options. An Option shall be exercisable in whole or in such installments
and at such times as may be determined by the Committee. The price at which a share of Common
Stock may be purchased upon exercise of a Nonqualified Stock Option shall be determined by the
Committee, but such exercise price shall not be less than 100% of the Fair Market Value per share
of Common Stock on the Grant Date. Except as otherwise provided in Section 7.3, the term of each
Option shall be as specified by the Committee; provided, however, that, no Options shall be
exercisable later than ten years from the Grant Date.
Options may be granted with respect to Restricted Stock or shares of Common Stock that are not
Restricted Stock, as determined by the Committee in its absolute discretion.
7.3 Restrictions Relating to Incentive Stock Options. Options granted in the form of Incentive Stock
Options shall, in addition to being subject to the terms and conditions of Section 7.2, comply with
Section 422(b) of the Code. Accordingly, no Incentive Stock Options shall be granted later than
ten years from the date of adoption of the Plan by the Board. To the extent that the aggregate
Fair Market Value (determined at the time the respective Incentive Stock Option is granted) of
Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an
individual during any calendar year under all incentive stock option plans of Crosstex and its
Affiliates exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified
Stock Options. The Committee shall determine, in accordance with the applicable provisions of the
Code, which of a Participant’s Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the Participant of such determination as soon as
practicable after such determination. The price at which a share of Common Stock may be purchased
upon exercise of an Incentive Stock Option shall be determined by the Committee, but such exercise
price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the Grant
Date. No Incentive Stock Option shall be granted to an Employee under the Plan if, at the time
such Option is granted, such Employee owns stock possessing more than 10% of the total combined
voting power of all classes of stock of Crosstex or an Affiliate, within the meaning of Section
422(b)(6) of the Code, unless (i) on the Grant Date of such Option, the exercise price of such
Option is at least 110% of the Fair Market Value of the Common Stock subject to the Option and (ii)
such Option by its terms is not exercisable after the expiration of five years from the Grant Date
of the Option.
7.4 Additional Terms and Conditions. The Committee may subject any Award of an Option to such other
terms, conditions, restrictions and/or limitations as it determines are necessary or appropriate,
provided they are not inconsistent with the Plan.
7.5 Exercise of Options. Subject to the terms and conditions of the Plan, Options shall be exercised
by the delivery of a written notice of exercise to Crosstex, setting forth the number of shares of
Common Stock with respect to which the Option is to be exercised, accompanied by full payment for
such shares.
Upon exercise of an Option, the exercise price of the Option shall be payable to Crosstex in
full either: (i) in cash or an equivalent acceptable to the Committee, or (ii) in the absolute
discretion of the Committee and in accordance with any applicable administrative guidelines
established by the Committee, by tendering one or more previously acquired nonforfeitable shares of
Common Stock that have been owned a minimum of 6 months having an aggregate Fair Market Value at
the time of exercise equal to the total exercise price (including an actual or deemed multiple
series of exchanges of such shares), or (iii) in a combination of the forms of payment specified in
clauses (i) and (ii) above.
From and after such time as Crosstex registers the Common Stock under Section 12 of the
Exchange Act, payment of the exercise price of an Option may also be made, in the absolute
discretion of the Committee, by delivery to Crosstex or its designated agent of an executed
irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell
or margin a sufficient portion of the shares with respect to which the Option is exercised and
deliver the sale or margin loan proceeds directly to Crosstex to pay the exercise price and any
required withholding taxes.
As soon as reasonably practicable after receipt of written notification of exercise of an
Option and full payment of the exercise price and any required withholding taxes, Crosstex shall
deliver to the Participant, in the Participant’s name, a stock certificate or certificates in an
appropriate amount based upon the number of shares of Common Stock purchased under the Option.
7.6 Termination of Employment or Service. Each Award Agreement embodying the Award of an Option shall
set forth the extent to which the Participant shall have the right to exercise the Option following
termination of the Participant’s employment or service with the Company. Such provisions shall be
determined by the Committee in its absolute discretion, need not be uniform among all Options
granted under the Plan and may reflect distinctions based on the reasons for termination of
employment or service. In the event a Participant’s Award Agreement embodying the award of an
Option does not set forth such termination provisions, the following termination provisions shall
apply with respect to such Award:
(a) Death, Disability or Retirement. If the employment or service of a Participant
shall terminate by reason of death, permanent and total disability (within the meaning of
Section 22(e)(3) of the Code) or retirement with the approval of the Committee on or after
the Participant’s attainment of age 60, each outstanding Option held by the Participant
shall become vested and may be exercised until the earlier of (i) the expiration of one year
(three months in the case of an Incentive Stock Option held by a retired Participant) from
the date of such termination of employment or service, or (ii) the expiration of the term of
such Option.
(b) Other Termination. If the employment or service of a Participant shall terminate
for any reason other than a reason set forth in paragraph (a) above or paragraph (c) below,
whether on a voluntary or involuntary basis, each outstanding Option held by the Participant
may be exercised, to the extent then vested, until the earlier of (i) the expiration of
three months from the date of such termination of employment or service, or (ii) the
expiration of the term of such Option.
(c) Termination for Cause. Notwithstanding paragraphs (a) and (b) above, if the
employment or service of a Participant is terminated for Cause, all outstanding Options held
by the Participant shall immediately be forfeited to the Company and no additional exercise
period shall be allowed, regardless of the vested status of the Option.
ARTICLE VIII. RESTRICTED STOCK
8.1 General. Awards may be granted to Employees, Consultants and Outside Directors in the form of
Restricted Stock. Restricted Stock shall be awarded in such numbers and at such times as the
Committee shall determine.
8.2 Restriction Period. At the time an Award of Restricted Stock is granted, the Committee shall
establish the Restriction Period applicable to such Restricted Stock. Each Award of Restricted
Stock may have a different Restriction Period, in the discretion of the Committee. The Restriction
Period applicable to a particular Award of Restricted Stock shall not be changed except as
permitted by Article IV or Section 8.3 of this Article.
8.3 Other Terms and Conditions. Restricted Stock awarded to a Participant under the Plan shall be
represented by a stock certificate registered in the name of the Participant or, at the option of
Crosstex, in the name of a nominee of Crosstex. Subject to the terms and conditions of the Award
Agreement, a Participant to whom Restricted Stock has been awarded shall have the right to receive
dividends thereon during the Restriction Period, to vote the Restricted Stock and to enjoy all
other stockholder rights with respect thereto, except that (i) the Participant shall not be
entitled to possession of the stock certificate representing the Restricted Stock until the
Restriction Period shall have expired, (ii) Crosstex shall retain custody of the Restricted Stock
during the Restriction Period, (iii) the Participant may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the Restricted Stock during the Restriction Period, and (iv) a
breach of the terms and conditions established by the Committee
pursuant to the Award of the
Restricted Stock shall cause a forfeiture of the Restricted Stock. At the time of an Award of
Restricted Stock, the Committee may, in its absolute discretion, prescribe additional terms,
conditions, restrictions and/or limitations applicable to the Restricted Stock, including, but not
limited to, rules pertaining to the termination of employment or service by reason of death,
permanent and total disability, retirement or otherwise, of a Participant prior to expiration of
the Restriction Period.
8.4 Payment for Restricted Stock. A Participant shall not be required to make any payment for
Restricted Stock awarded to the Participant, except to the extent otherwise required by the
Committee or by applicable law.
8.5 Miscellaneous. Nothing in this Article shall prohibit the exchange of shares of Restricted Stock
issued under the Plan pursuant to a plan of reorganization for stock or securities of Crosstex or
another corporation that is a party to the reorganization, but the stock or securities so received
for shares of Restricted Stock shall, except as provided in Article IV or IX, become subject to the
restrictions applicable to the Award of such Restricted Stock. Any shares of stock received as a
result of a stock split or stock dividend with respect to shares of Restricted Stock shall also
become subject to the restrictions applicable to the Award of such Restricted Stock.
ARTICLE IX. CHANGE OF CONTROL
9.1 Definition of Change of Control. A “Change of Control” means: (a) the consummation of a merger or
consolidation of the Company with or into another entity or any other transaction, if Persons who
were not shareholders of the Company immediately prior to such merger, consolidation or other
transaction beneficially own immediately after such merger, consolidation or other transaction 50%
or more of the voting power of the outstanding securities of each of (i) the continuing or
surviving entity and (ii) any direct or indirect parent entity of such continuing or surviving
entity; (b) the sale, transfer or other disposition of all or substantially all of the Company’s
assets; (c) a change in the composition of the Board as a result of which fewer than 50% of the
incumbent directors are directors who either (i) had been directors of Crosstex on the date 12
months prior to the date of the event that may constitute a Change of Control (the “original
directors”) or (ii) were elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of the aggregate of the original directors who were still in office at
the time of the election or nomination and the directors whose election or nomination was
previously so approved; or (d) any transaction as a result of which any Person is the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing at least 50% of the total voting
power represented by the Company’s then outstanding voting securities.
9.2 Effect on Outstanding Awards. Immediately prior to a Change of Control, all Awards shall
automatically vest and become payable or exercisable, as the case may be, in full. In this regard,
all Restriction Periods shall terminate. The phrase “Immediately prior to a Change of Control”
shall be understood to mean sufficiently in advance of a Change of Control to permit Participants
to take all steps reasonably necessary to exercise an Award, if applicable, and to deal with the
Common Stock underlying all Awards so that all Awards and Common Stock issuable with respect
thereto may be treated in the same manner as the shares of stock of other stockholders in
connection with the Change of Control.
10.1 Plan Amendment and Termination. The Board may at any time suspend, terminate, amend or modify the
Plan, in whole or in part; provided, however, that no amendment or modification of the Plan shall
become effective without the approval of such amendment or modification by the stockholders of
Crosstex (i) if such amendment or modification increases the maximum number of shares subject to
the Plan (except as provided in Article IV) or changes the designation or class of persons eligible
to receive Awards under the Plan, or (ii) if counsel for Crosstex determines that such approval is
otherwise required by or necessary to comply with applicable law. The Plan shall terminate upon
the earlier of (i) the termination of the Plan by the Board, or (ii) the expiration of ten years
from the Effective Date. Upon termination of the Plan, the terms and provisions of the Plan shall,
notwithstanding such termination, continue to apply to Awards granted prior to such termination.
No suspension, termination, amendment or modification of the Plan shall adversely affect in any
material way any Award previously granted under the Plan, without the consent of the Participant
(or the permitted transferee) holding such Award.
10.2 Award Amendment. The Board may amend the terms of any outstanding Award granted pursuant to this
Plan, but no such amendment shall adversely affect in any material way the Participant’s (or a
permitted transferee’s) rights under an outstanding Award without the consent of the Participant
(or the permitted transferee) holding such Award; provided, however, that no amendment shall be
made that would cause the exercise price of an Option to be less than the Fair Market Value of the
Common Stock subject to the Option on the Grant Date.
ARTICLE XI. MISCELLANEOUS
11.1 Award Agreements. After the Committee grants an Award under the Plan to a Participant, Crosstex
and the Participant shall enter into an Award Agreement setting forth the terms, conditions,
restrictions and/or limitations applicable to the Award and such other matters as the Committee may
determine to be appropriate. The terms and provisions of the respective Award Agreements need not
be identical. All Award Agreements shall be subject to the provisions of the Plan, and in the
event of any conflict between an Award Agreement and the Plan, the terms of the Plan shall govern.
11.2 Listing Conditions.
(a) As long as the Common Stock is listed on a national securities exchange or system
sponsored by a national securities association, the issuance of any shares of Common Stock
pursuant to an Award shall be conditioned upon such shares being listed on such exchange or
system. Crosstex shall have no obligation to issue such shares unless and until such shares
are so listed, and the right to exercise any Option or other Award
with respect to such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to Crosstex or its Affiliates shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Award is or may in the
circumstances be unlawful or result in the imposition of excise taxes on Crosstex or its
Affiliates under the statutes, rules or regulations of any applicable jurisdiction, Crosstex
or its Affiliates shall have no obligation to make such sale or delivery, or to make any
application or to effect or to maintain any qualification or registration under the
Securities Act of 1933, as amended, or otherwise, with respect to shares of Common Stock or
Awards, and the right to exercise any Option or other Award shall be suspended until, in the
opinion of said counsel, such sale or delivery shall be lawful or will not result in the
imposition of excise taxes on Crosstex or its Affiliates.
(c) Upon termination of any period of suspension under this Section 11.2, any Award
affected by such suspension which shall not then have expired or terminated shall be
reinstated as to all shares available before such suspension and as to shares which would
otherwise have become available during the period of such suspension, but no such suspension
shall extend the term of any Award.
11.3 Additional Conditions. Notwithstanding anything in the Plan to the contrary: (i) Crosstex may, if
it shall determine it necessary or desirable for any reason, at the time of grant of any Award or
the issuance of any shares of Common Stock pursuant to any Award, require the recipient of the
Award or such shares of Common Stock, as a condition to the receipt thereof, to deliver to Crosstex
a written representation of present intention to acquire the Award or such shares of Common Stock
for his or her own account for investment and not for distribution; (ii) the certificate for shares
of Common Stock issued to a Participant may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer, and (iii) all certificates for shares of
Common Stock delivered under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations and other
requirements of the SEC, any stock exchange upon which the Common Stock is then quoted, any
applicable federal or state securities law, and any applicable corporate law, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate reference to such
restrictions.
11.4 Nonassignability. No Award granted under the Plan may be sold, transferred, pledged, exchanged,
hypothecated or otherwise disposed of, other than by will or pursuant to the applicable laws of
descent and distribution. Further, no such Award shall be subject to execution, attachment or
similar process. Any attempted sale, transfer, pledge, exchange, hypothecation or other
disposition of an Award not specifically permitted by the Plan or the Award Agreement shall be null
and void and without effect. All Awards granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant or, in the event of the
Participant’s legal incapacity, by his or her guardian or legal representative. Notwithstanding
the foregoing, to the extent specifically provided by the Committee, an Award, including an Option,
may be transferred by a Participant without consideration to immediate family members or related
family trusts, limited partnerships or similar entities or on such terms and conditions as the
Committee may from time to time establish.
11.5 Withholding Taxes. The Company shall be entitled to deduct from any payment made under the Plan,
regardless of the form of such payment, the amount of all applicable income and employment taxes
required by law to be withheld with respect to such payment, may require the Participant to pay to
the Company such withholding taxes prior to and as a condition of the making of any payment or the
issuance or delivery of any shares of Common Stock under the Plan, and shall be entitled to deduct
from any other compensation payable to the Participant any withholding obligations with respect to
Awards under the Plan. In accordance with any applicable administrative guidelines it establishes,
the Committee may allow a Participant to pay the amount of taxes required by law to be withheld
from or with respect to an Award by (i) withholding shares of Common Stock from any payment of
Common Stock due as a result of such Award, or (ii) permitting the Participant to deliver to the
Company previously acquired shares of Common Stock, in each case having a Fair Market Value equal
to the amount of such required withholding taxes. No payment shall be made and no shares of Common
Stock shall be issued pursuant to any Award unless and until the applicable tax withholding
obligations have been satisfied.
11.6 No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant
to the Plan or any Award granted hereunder, and except as otherwise provided herein, no payment or
other adjustment shall be made in respect of any such fractional share.
11.7 Notices. All notices required or permitted to be given or made under the Plan or any Award
Agreement shall be in writing and shall be deemed to have been duly given or made if (i) delivered
personally, (ii) transmitted by first class registered or certified United States mail, postage
prepaid, return receipt requested, (iii) sent by prepaid overnight courier service, or (iv) sent by
telecopy or facsimile transmission, answer back requested, to the person who is to receive it at
the address that such person has theretofore specified by written notice delivered in accordance
herewith. Such notices shall be effective (i) if delivered personally or sent by courier service,
upon actual receipt by the intended recipient, (ii) if mailed, upon the earlier of five days after
deposit in the mail or the date of delivery as shown by the return receipt therefor, or (iii) if
sent by telecopy or facsimile transmission, when the answer back is received. Crosstex or a
Participant may change, at any time and from time to time, by written notice to the other, the
address that it or such Participant had theretofore specified for receiving notices. Until such
address is changed in accordance herewith, notices hereunder or under an Award Agreement shall be
delivered or sent (i) to a Participant at his or her address as set forth in the records of the
Company or (ii) to Crosstex at the principal executive offices of Crosstex clearly marked
“Attention: LTIP Administrator.”
11.8 Binding Effect. The obligations of Crosstex under the Plan shall be binding upon any successor
corporation or organization resulting from the merger, consolidation or other reorganization of
Crosstex, or upon any successor corporation or organization succeeding to all or substantially all
of the assets and business of Crosstex. The terms and conditions of the Plan shall be binding upon
each Participant and his or her heirs, legatees, distributees and legal representatives.
11.9 Severability. If any provision of the Plan or any Award Agreement is held to be illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan
or such agreement, as the case
may be, but such provision shall be fully severable and the Plan or such agreement, as the case may
be, shall be construed and enforced as if the illegal or invalid provision had never been included
herein or therein.
11.10 No Restriction of Corporate Action. Nothing contained in the Plan shall be construed to prevent
Crosstex or any Affiliate from taking any corporate action (including any corporate action to
suspend, terminate, amend or modify the Plan) that is deemed by Crosstex or such Affiliate to be
appropriate or in its best interest, whether or not such action would have an adverse effect on the
Plan or any Awards made or to be made under the Plan. No Participant or other person shall have
any claim against Crosstex or any Affiliate as a result of such action.
11.11 Governing Law. The Plan shall be governed by and construed in accordance with the internal laws
(and not the principles relating to conflicts of laws) of the State of Delaware except as
superseded by applicable federal law.
11.12 No Right, Title or Interest in Company Assets. No Participant shall have any rights as a
stockholder of Crosstex as a result of participation in the Plan until the date of issuance of a
stock certificate in his or her name and, in the case of Restricted Stock, unless and until such
rights are granted to the Participant pursuant to the Plan. To the extent any person acquires a
right to receive payments from the Company under the Plan, such rights shall be no greater than the
rights of an unsecured general creditor of the Company, and such person shall not have any rights
in or against any specific assets of the Company. All of the Awards granted under the Plan shall
be unfunded.
11.13 Risk of Participation. Nothing contained in the Plan shall be construed either as a guarantee by
Crosstex or its Affiliates, or their respective stockholders, directors, officers or employees, of
the value of any assets of the Plan or as an agreement by Crosstex or its Affiliates, or their
respective
stockholders, directors, officers or employees, to indemnify anyone for any losses,
damages, costs or expenses resulting from participation in the Plan.
11.14 No Guarantee of Tax Consequences. No person connected with the Plan in any capacity, including,
but not limited to, Crosstex and the Affiliates and their respective directors, officers, agents
and employees, makes any representation, commitment or guarantee that any tax treatment, including,
but not limited to, federal, state and local income, estate and gift tax treatment, will be
applicable with respect to any Awards or payments thereunder made to or for the benefit of a
Participant under the Plan or that such tax treatment will apply to or be available to a
Participant on account of participation in the Plan.
11.15 Continued Employment or Service. Nothing contained in the Plan or in any Award Agreement shall
confer upon any Participant the right to continue in the employ or service of the Company, or
interfere in any way with the rights of the Company to terminate a Participant’s employment or
service at any time, with or without cause.
11.16 Miscellaneous. Headings are given to the articles and sections of the Plan solely as a convenience
to facilitate reference. Such headings shall not be deemed in any way material or relevant to the
construction of the Plan or any provisions hereof. The use of the masculine gender shall also
include within its meaning the feminine. Wherever the context of the Plan dictates, the use of the
singular shall also include within its meaning the plural, and vice versa.
IN
WITNESS WHEREOF, this Plan has been executed as of this
6th day of
September 2006.
Please complete, date, sign and mail your
proxy card in the postage-paid envelope
provided as soon as possible.
â Please detach along perforated line and mail in the envelope provided. â
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK.
1.
Proposal to amend Crosstex Energy, Inc’s Restated Certificate of Incorporation to
increase the authorized shares of capital stock and to clarify a liquidation provision
applicable to common stock.
FOR
o
AGAINST
o
ABSTAIN
o
2.
Proposal to approve the Crosstex Energy, Inc. Amended and Restated Long-Term
Incentive Plan (including the increase in the number of shares available for issuance
thereunder).
FOR
o
AGAINST
o
ABSTAIN
o
THE BOARD OF
DIRECTORS
RECOMMENDS A VOTE
“FOR” PROPOSALS 1
AND 2.
IN THEIR
DISCRETION, THE
PROXIES ARE
AUTHORIZED TO VOTE
UPON SUCH OTHER
MATTERS AS MAY
PROPERLY COME
BEFORE THE MEETING.
TO INCLUDE ANY
COMMENTS, USE THE
COMMENTS BOX ON THE
REVERSE SIDE OF
THIS CARD.
To change the address on your account,
please check the box at right and indicate
your new address in the address space
above. Please note that changes to the
registered name(s) on the account may not
be submitted via this method .
o
Signature of Stockholder
Date:
Signature of Stockholder
Date:
Note:
Please sign exactly as your name or names appear hereon. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership’s name by authorized person.
PROXY
CROSSTEX ENERGY, INC.
2501 CEDAR SPRINGS RD. DALLAS, TEXAS75201
Proxy Solicited on Behalf of the Board of Directors.
The undersigned, revoking any proxy heretofore given for the meeting of the stockholders
described below, hereby appoints Barry E. Davis and Joe A. Davis, and each of them, proxies, with
full powers of substitution, to represent the undersigned at the special meeting of stockholders of
Crosstex Energy, Inc. to be held on October 26, 2006, and at any adjournment or postponement
thereof, and to vote all shares that the undersigned would be entitled to vote if personally
present as follows:
The shares represented by this proxy will be voted as directed herein. IF THIS PROXY IS DULY
EXECUTED AND RETURNED, AND NO VOTING DIRECTIONS ARE GIVEN HEREIN, SUCH SHARES WILL BE VOTED “FOR”
APPROVAL OF PROPOSALS 1 AND 2. The undersigned hereby acknowledges receipt of notice of, and the
proxy statement for, the aforesaid special meeting of stockholders.
(Continued and to be signed and dated on the reverse side)
COMMENTS:
Dates Referenced Herein and Documents Incorporated by Reference