UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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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)
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CROSSTEX ENERGY, INC.
2501 Cedar Springs Rd.
Dallas, Texas 75201
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 7,
2010
To the Stockholders of Crosstex Energy, Inc.:
The annual meeting of stockholders of Crosstex Energy, Inc., a
Delaware corporation (the Company), will be held on
Friday, May 7, 2010, at 11:30 a.m., local time, at the
Companys offices located at 2501 Cedar Springs Rd.,
Dallas, Texas 75201 for the following purposes:
1. To consider and vote upon the election of three
Class III directors as members of the Board of Directors to
serve until the Companys 2013 annual meeting of
stockholders or until their respective successors have been duly
elected and qualified;
2. To consider and vote upon a proposal to ratify the
appointment of KPMG LLP as the Companys independent
registered public accounting firm for the fiscal year ending
December 31, 2010;
3. To consider and vote upon a stockholder proposal to
amend the Companys employment policy to explicitly
prohibit discrimination based on sexual orientation and gender
identity or expression; and
4. To transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
Your Board of Directors recommends that you vote
FOR
the Boards nominees for directors;
FOR
the ratification of the appointment of
KPMG LLP as the Companys independent registered public
accounting firm; and
AGAINST
the stockholder
proposal to amend the Companys employment policy to
explicitly prohibit discrimination based on sexual orientation
and gender identity or expression.
The Board of Directors has fixed the close of business on
March 17, 2010 as the record date for the determination of
stockholders entitled to notice of and to vote at the annual
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. A record of the Companys activities
during 2009 and financial statements for the fiscal year ended
December 31, 2009 are contained in the Companys 2009
Annual Report on
Form 10-K.
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 voting over the
Internet or, if you received a paper copy of a proxy or voting
instruction card by mail, by completing, signing, dating and
mailing the 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
March 25, 2010
Important
Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on May 7,
2010:
This
Proxy Statement and the accompanying Annual Report to
Stockholders are available at:
http://phx.corporate-ir.net/phoenix.zhtml?c=148525&p=proxy
CROSSTEX
ENERGY, INC.
2501 Cedar Springs Rd.
Dallas, Texas 75201
PROXY
STATEMENT
For
Annual Meeting of Stockholders
To Be Held on May 7, 2010
GENERAL
These proxy materials (including this proxy statement and our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 (the 2009
Annual Report)) have been made available on the Internet
or delivered in paper copy 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 the annual meeting of stockholders to be
held at the time and place and for the purposes set forth in the
accompanying notice. The approximate date this proxy statement
is first furnished to stockholders is March 25, 2010. If
you received a paper copy of these materials by mail, the proxy
materials also include a proxy card or a voting instruction card
for the annual meeting.
Proxies
and Voting Instructions
We are mailing to our stockholders a notice about the Internet
availability of the proxy materials instead of a paper copy of
the proxy materials. All stockholders receiving the notice will
have the ability to access the proxy materials over the Internet
and may request to receive a paper copy of the proxy materials
by mail. Instructions on how to access the proxy materials over
the Internet or to request a paper copy may be found on the
notice. In addition, the notice contains instructions on how
stockholders may request to receive proxy materials in printed
form by mail or electronically by
e-mail
on an
ongoing basis. We are providing some of our stockholders,
including stockholders who have previously requested to receive
paper copies of the proxy materials, with paper copies of the
proxy materials instead of a notice about the Internet
availability of the proxy materials. All stockholders who do not
receive the notice will receive a paper copy of the proxy
materials by mail.
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 in the following manners:
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By Internet
Stockholders who received
a notice about the Internet availability of the proxy materials
may submit proxies over the Internet by following the
instructions on the notice. Stockholders who have received a
paper copy of a proxy card or voting instruction card by mail
may submit proxies over the Internet by following the
instructions on the proxy card or voting instruction card.
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By Mail
Stockholders who have received
a paper copy of a proxy card or voting instruction card by mail
may submit proxies by completing, signing and dating their proxy
card or voting instruction card and mailing it in the
accompanying postage paid envelope. Proxy cards must be received
by us before voting begins at the annual meeting.
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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:
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Giving written notice of the revocation to our corporate
secretary;
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Appearing and voting in person at the annual meeting;
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Voting again by Internet before 11:59 p.m., Eastern Time,
on May 6, 2010; or
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Properly submitting a later-dated proxy by delivering a
later-dated proxy card to our corporate secretary.
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If you attend the annual 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. 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
annual meeting and to make a written report thereof. Prior to
the annual 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
annual 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. Brokers and nominees do not have
discretionary authority to vote with respect to the election of
directors. Abstentions, on the other hand, are considered to be
present at the meeting and entitled to vote on the matter
abstained from.
To be elected, nominees for director must receive a plurality of
the votes cast. This means that the director nominees with the
most votes are elected, regardless of whether any nominee
received a majority of votes cast. With regard to the election
of directors, votes may be cast in favor of or withheld from
each nominee. Votes that are withheld will be excluded entirely
from the vote and will have no effect. Broker non-votes and
other limited proxies will have no effect on the outcome of the
election of directors.
With regard to the proposal to ratify the appointment of KPMG
LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2010, and the stockholder
proposal to amend the Companys employment policy to
explicitly prohibit discrimination based on sexual orientation
and gender identity or expression, an abstention will have the
same effect as a vote against the proposals. Broker non-votes
and other limited proxies will have no effect on the outcome of
the vote with respect to such proposals.
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 March 17, 2010, the record date for
the annual meeting, are entitled to notice of and to vote at the
annual meeting. On the record date for the annual meeting, there
were 46,566,498 shares of Common Stock outstanding and
entitled to be voted at the annual 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.
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PROPOSAL ONE:
ELECTION OF DIRECTORS
Our Restated Certificate of Incorporation provides for three
classes of directors, with approximately one-third of the
directors constituting our Board being elected each year to
serve a three-year term. There are three directors comprising
the class whose term expires at the 2010 annual meeting: Bryan
H. Lawrence, Cecil E. Martin Jr. and James C. Crain.
The Governance Committee of our Board has recommended, and our
Board has nominated, Mr. Lawrence, Mr. Martin and
Mr. Crain for re-election as directors of the Company to
serve three-year terms expiring in 2013.
The directors nominated for election this year will be elected
by a plurality of the shares of Common Stock present in person
or represented by proxy at the annual meeting and entitled to
vote. All duly submitted and unrevoked proxies will be voted for
the nominees selected by our Board, except where authorization
to so vote is withheld. Proxies may not be voted for a greater
number of persons than the nominees named in this proxy
statement.
Our Board unanimously recommends that stockholders
vote FOR the election of its nominees for
director.
Information with respect to the directors nominated for election
this year, and the directors whose terms do not expire at the
2010 annual meeting, is presented below.
NOMINEES
FOR DIRECTORS
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Bryan H. Lawrence,
age 67, director since 2000
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Mr. Lawrence joined our predecessor as a director in May
2000 and served as Chairman of the Board until May 2008. He
currently serves as Lead Director of our Board.
Mr. Lawrence is a founder and senior manager of Yorktown
Partners LLC, the manager of the Yorktown group of investment
partnerships, which make investments in companies engaged in the
energy industry. The Yorktown partnerships were formerly
affiliated with the investment firm of Dillon, Read &
Co. Inc., where Mr. Lawrence had been employed since 1966,
serving as a Managing Director until the merger of Dillon Read
with SBC Warburg in September 1997. Mr. Lawrence also
serves as a director of Hallador Petroleum Company (OTC BB:
HPCO.OB), Star Gas Partners L.P. (NYSE: SGU), Winstar Resources
Ltd. (a Canadian public company), Approach Resources, Inc.
(NASDAQ: AREX) and certain non-public companies in the energy
industry in which Yorktown partnerships hold equity interests.
Mr. Lawrence is a graduate of Hamilton College and also has
an M.B.A. from Columbia University. Mr. Lawrence has also
served as a director of Crosstex Energy GP, LLC since December
2002. Mr. Lawrences financial and investment
experience, and experience in the energy industry, among other
factors, led the Board to conclude that he should serve as a
director.
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Cecil E. Martin Jr.,
age 68, director since 2006
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Mr. Martin joined Crosstex Energy, Inc. as a director in
January 2006. He currently serves as chairman of the
Compensation Committee of our Board and as a member of the Audit
Committee. He has been an independent residential and commercial
real estate investor since 1991. From 1973 to 1991 he served as
chairman of the public accounting firm Martin, Dolan and Holton
in Richmond, Virginia. He began his career as an auditor at
Ernst and Ernst. He holds a B.B.A. degree from Old Dominion
University and is a Certified Public Accountant. Mr. Martin
also serves on the board and as chairman of the audit committee
for Comstock Resources, Inc. (NYSE: CRK),
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an independent energy company engaged in oil and gas
acquisitions, exploration and development. Mr. Martin
served on the board and as chairman on the audit committee for
Bois dArc Energy, Inc. (NYSE: BDE) until its merger into
Stone Energy Corporation (NYSE: SGY) in 2008. Mr. Martin
also has served as a director of Crosstex Energy GP, LLC since
January 2006. Mr. Martins accounting and financial
experience, experience on audit committees of other public
companies, and related industry experience, among other factors,
led the Board to conclude that he should serve as a director.
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James C. Crain,
age 61, director since 2006
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Mr. Crain joined Crosstex Energy, Inc. as a director in
July 2006. He currently serves as a member of the Audit
Committee of our Board and a member of the Governance Committee
of our Board. Since 1989, Mr. Crain has served as president
of Marsh Operating Company, where he has worked since 1984, an
investment management company focusing on energy investing, and
since 1997 as general partner of Valmora Partners, L.P., a
private investment partnership. Prior to Marsh, he served as a
partner at Jenkens & Gilchrist where he headed the law
firms energy section. Mr. Crain also serves on the
boards of GeoMet, Inc. (NASDAQ: GMET), and Approach Resources,
Inc. (NASDAQ: AREX). Mr. Crain served as a director of
Crusader Energy Group, Inc. (AMEX: KRU) until December 2009.
Mr. Crain also served as a director of Crosstex Energy GP,
LLC from December 2005 to August 2008. He graduated from the
University of Texas at Austin with a B.B.A. degree, a master of
professional accounting and a doctor of jurisprudence.
Mr. Crains legal background and his experience in the
oil and natural gas industry, among other factors, led the Board
to conclude that he should serve as a director.
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CLASS WHOSE
TERM EXPIRES IN 2011
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Barry E. Davis,
age 48, director since 1996
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As President, Chief Executive Officer and Chairman of the Board,
Mr. Davis led the management buyout of the midstream assets
of Comstock Natural Gas, Inc. in December 1996, which
transaction resulted in the formation of our predecessor.
Mr. Davis has served as director since our initial public
offering in December 2002. Mr. Davis was President and
Chief Operating Officer of Comstock Natural Gas and founder of
Ventana Natural Gas, a gas marketing and pipeline company that
was purchased by Comstock Natural Gas. Mr. Davis started
Ventana Natural Gas in June 1992. Prior to starting Ventana, he
was Vice President of Marketing and Project Development for
Endevco, Inc. Before joining Endevco, Mr. Davis was
employed by Enserch Exploration in the marketing group.
Mr. Davis holds a B.B.A. in Finance from Texas Christian
University. Mr. Davis leadership skills and
experience in the midstream natural gas industry, among other
factors, led the Board to conclude that he should serve as a
director.
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Robert F. Murchison,
age 56, director since 2004
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Mr. Murchison joined us as a director upon the completion
of our initial public offering in January 2004. He currently
serves as a member of the Compensation Committee of our Board
and as a member of the Governance Committee of our Board.
Mr. Murchison
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has been the President of the general partner of Murchison
Capital Partners, L.P., a private equity investment partnership,
since 1992. Prior to founding Murchison Capital Partners, L.P.,
Mr. Murchison held various positions with Romacorp, Inc.,
the franchisor and operator of Tony Romas restaurants,
including Chief Executive Officer from 1984 to 1986 and Chairman
of the Board of Directors from 1984 to 1993. He served as a
director of Cenergy Corporation, an oil and gas exploration and
production company, from 1984 to 1987, Conquest Exploration
Company from 1987 to 1991 and has served as a director of TNW
Corporation, a short line railroad holding company, since 1981,
and Tecon Corporation, a holding company with holdings in real
estate development and the fund of funds management business,
since 1978. Mr. Murchison also served as a director of
Crosstex Energy GP, LLC from December 2002 to May 2008.
Mr. Murchison holds a bachelors degree in history
from Yale University. Mr. Murchisons investment
experience and leadership skills, among other factors, led the
Board to conclude that he should serve as a director.
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CLASS WHOSE
TERM EXPIRES IN 2012
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Leldon E. Echols,
age 54, director since 2008
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Mr. Echols joined Crosstex Energy, Inc. as a director in
January 2008. He currently serves as chairman of the Audit
Committee of our Board. Mr. Echols is a private investor.
Mr. Echols also currently serves as an independent director
of Trinity Industries, Inc. (NYSE: TRN), a leading diversified
holding company with a subsidiary group that provides a variety
of products and services for the transportation, industrial,
construction and energy sectors, and Holly Corporation (NYSE:
HOC), an independent petroleum refiner and marketer.
Mr. Echols brings 30 years of financial and business
experience to Crosstex. After 22 years with the accounting
firm Arthur Andersen LLP, which included serving as managing
partner of the firms audit and business advisory practice
in North Texas, Colorado and Oklahoma, Mr. Echols spent six
years with Centex Corporation as executive vice president and
chief financial officer. He retired from Centex Corporation in
June 2006. Mr. Echols is also a member of the boards of
directors of two private companies, Roofing Supply Group
Holdings, Inc. and Colemont Corporation. He also served on the
board of TXU Corp. (NYSE: TXU) where he chaired the Audit
Committee and was a member of the Strategic Transactions
Committee until the completion of the private equity buyout of
TXU in October 2007. Mr. Echols earned a Bachelor of
Science degree in accounting from Arkansas State University and
is a Certified Public Accountant. He is a member of the American
Institute of Certified Public Accountants and the Texas Society
of CPAs. Mr. Echols has also served as a director of
Crosstex Energy GP, LLC since January 2008.
Mr. Echols accounting and financial experience,
service as the Chief Financial Officer for a public company,
among other factors, led the Board to conclude that he should
serve as a director.
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Sheldon B. Lubar,
age 80, director since 2004
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Mr. Lubar joined Crosstex Energy, Inc. as a director in
January 2004. He currently serves as chairman of the Governance
Committee of our Board. Mr. Lubar has been Chairman of the
Board of Lubar & Co. Incorporated, a private
investment and venture capital firm he founded, since 1977. He
was Chairman of the Board of Christiana Companies, Inc., a
logistics and manufacturing company, from 1987 until its merger
with Weatherford International in 1995 and also served as a
director of Weatherford International, Inc. (NYSE: WFT) until
2008. Mr. Lubar also served as Chairman and a director of
Total Logistics, Inc. until its merger with Super Value
Companies (NYSE: SVU) in 2005. Mr. Lubar also serves as a
director of Hallador Petroleum Company (OTC BB:HPCO.OB), Star
Gas Partners L.P. (NYSE: SGU) and Approach Resources, Inc.
(NASDAQ: AREX). Mr. Lubar holds a bachelors degree in
Business Administration and a Law degree from the University of
Wisconsin Madison. He was awarded an honorary Doctor
of Commercial Science degree in 1988 from the University of
Wisconsin Milwaukee and an Honorary Doctor of
Humanities degree in 2009 from the University of
Wisconsin Madison. Mr. Lubar joined Crosstex
Energy GP, LLC as a director upon the completion of its initial
public offering in December 2002. Mr. Lubars
investment experience, industry experience and service on other
public company boards, among other factors, led the Board to
conclude that he should serve as a director.
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ADDITIONAL
INFORMATION REGARDING THE BOARD OF DIRECTORS
Independent
Directors
Messrs. Crain, Echols, Lubar, Martin and Murchison qualify
as independent in accordance with the published
listing requirements of The NASDAQ Global Select Market
(NASDAQ). The NASDAQ independence definition
includes a series of objective tests, such as that the director
is not an employee of the company and has not engaged in various
types of business dealings with the company. In addition, as
further required by the NASDAQ rules, our Board has made a
subjective determination as to each independent director that no
relationships exist that, in the opinion of the Board, would
interfere with the exercise of independent judgment in carrying
out the responsibilities of a director.
In addition, the members of the Audit Committee of our Board
each qualify as independent under special standards
established by the Securities and Exchange Commission
(SEC) for members of audit committees, and the Audit
Committee includes at least one member who is determined by our
Board to meet the qualifications of an audit committee
financial expert in accordance with SEC rules, including
that the person meets the relevant definition of an
independent director. Messrs. Echols and Martin
are the independent directors who have been determined to be
audit committee financial experts. Stockholders should
understand that this designation is a disclosure requirement of
the SEC related to their experience and understanding with
respect to certain accounting and auditing matters. The
designation does not impose on such directors any duties,
obligations or liabilities that are greater than are generally
imposed on them as members of the Audit Committee and the Board,
and their designation as audit committee financial experts
pursuant to this SEC requirement does not affect the duties,
obligations or liabilities of any other member of the Audit
Committee or the Board.
Board
Committees
Our Board has, and appoints the members of, standing Audit,
Compensation and Governance Committees. Each member of the
Audit, Compensation and Governance Committees is an independent
director in accordance with
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NASDAQ standards described above. Each of the Board committees
has a written charter approved by the Board. Copies of such
charters are available to any person, free of charge, on our
website at www.crosstexenergy.com.
The Audit Committee of our Board is currently comprised of
Messrs. Echols (chair), Crain and Martin. The Audit
Committee assists our Board in its general oversight of our
financial reporting, internal controls and audit functions, and
is directly responsible for the appointment, retention,
compensation and oversight of the work of our independent
auditors. The Audit Committee held four meetings in 2009.
The Compensation Committee of our Board is currently comprised
of Messrs. Martin (chair) and Murchison. The Compensation
Committee oversees compensation decisions for our officers as
well as the compensation plans described herein. The
Compensation Committee held six meetings in 2009.
The Governance Committee, comprised of Messrs. Lubar
(chair), Crain and Murchison, reviews matters involving
governance, including assessing the effectiveness of current
policies, monitoring industry developments, developing director
selection criteria, recommending director nominees, recommending
committee structures within the Board, managing the assessment
process of the Board and individual directors, annually
reviewing and recommending the compensation of directors and
performing other duties as delegated from time to time. The
Governance Committee held four meetings in 2009.
Our Governance Committee identifies and recommends qualified
candidates to serve as nominees for director. When identifying
director nominees, the Governance Committee may consider, among
other factors, the persons reputation, integrity and
independence from us; skills and business, government or other
professional acumen, bearing in mind the composition of our
Board and the current state of our company and the industry
generally; the number of other public companies for which the
person serves as director; the diversity of the Board
members backgrounds and professional experience; and the
availability of the persons time and commitment to us. The
same criteria will be evaluated with respect to candidates
recommended by stockholders. In the case of current directors
being considered for re-election, the Governance Committee will
also take into account the directors tenure as a member of
our Board, the directors history of attendance at meetings
of the Board and committees thereof and the directors
preparation for and participation in such meetings.
The Governance Committee also considers nominees recommended by
stockholders as candidates for election to our Board. A
stockholder wishing to nominate a candidate for election to the
Board at the annual meeting of stockholders is required to give
written notice to our Corporate Secretary of his or her
intention to make a nomination. The notice of nomination must be
delivered to or mailed and received at our principal executive
offices not less than 120 calendar days prior to the one year
anniversary of the date of our proxy statement issued in
connection with the prior years annual meeting. Pursuant
to our bylaws, the notice of nomination is required to contain
certain information about both the nominee and the stockholder
making the nomination, including information sufficient to allow
the independent directors to determine if the candidate meets
the criteria for Board membership. We may require that the
proposed nominee furnish additional information in order to
determine that persons eligibility to serve as a director.
A nomination that does not comply with the above procedure will
be disregarded.
Following identification of the need to replace a director, add
a director or re-elect a director to our Board, and considering
of the above criteria and any stockholder recommendations, the
Governance Committee will recommend to our Board one or more
nominees, as appropriate, for consideration by the full Board.
Following such consideration, our Board will submit its
recommended nominees to the shareholders for election.
Board
Meetings and Attendance
Our Board met seventeen times in 2009. All incumbent directors
attended in excess of 75% of the total number of meetings of our
Board and committees of our Board on which they served. Our
Board does not currently have a policy with regard to attendance
of Board members at the annual meeting of stockholders and six
members of our Board attended our annual meeting of stockholders
in 2009.
7
Stockholder
Communications with Directors
Our Board has approved the following process for our
stockholders and other security holders to send communications
to our Board. To contact all directors on our Board, all
directors on a Board committee, an individual director or the
non-management directors of our Board as a group, a stockholder
can send written communications to our Board by mail addressed
to:
Board of Directors
Crosstex Energy, Inc.
2501 Cedar Springs Rd.
Dallas, Texas 75201
Or by electronic mail to:
Board.member@crosstexenergy.com
Communications addressed to our Board will be received by our
Corporate Secretarys office. Our Corporate Secretary will:
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refer substantiated allegations of improper accounting, internal
controls or auditing matters affecting us to the Chairman of our
Audit Committee;
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|
|
refer substantiated allegations of other improper conduct
affecting us to the Chairman of the Board;
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|
|
advise the Board at its regularly scheduled meetings of
significant stockholder communications; and
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|
|
refer questions concerning our products, services and human
resources issues to the appropriate department in our company
for a response.
|
Individuals may communicate with non-management directors by
sending written communications to the address listed above to
the attention of the Lead Director of the Board, who is a
non-management director.
Board
Leadership Structure and Risk Oversight
The Board has no policy that requires that the positions of the
Chairman of the Board (the Chairman) and the Chief
Executive Officer be separate or that they be held by the same
individual. The Board believes that this determination should be
based on circumstances existing from time to time, including the
composition, skills, and experience of the Board and its
members, specific challenges faced by the Company or the
industry in which it operates, and governance efficiency. Based
on these factors, the Board has elected Barry E. Davis to serve
as our Chairman and Chief Executive Officer, and elected Bryan
H. Lawrence to serve as Lead Director. The Board believes this
is the most appropriate structure for the Company at this time
because it makes the best use of Mr. Lawrences skills
and experience, while enhancing Mr. Davis ability to
lead decisively and communicate the Companys message and
strategy clearly and consistently to its shareholders,
employees, and customers.
The Board has adopted the following principles regarding the
duties of the Chairman and the Lead Director:
Chairman:
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developing agendas in consultation with management, the Lead
Director, and other directors, and presiding over Board meetings;
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|
taking the lead in developing short- and long-term goals for
management in consultation with the entire Board and evaluating
progress in meeting expectations;
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conducting shareholders meetings; and
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|
taking the lead in ensuring Board compliance with corporate
governance policies and in setting the tone for ethical business
conduct.
|
8
Lead
Director:
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|
serving as a liaison (at the request of any Board member or the
Chairman) between the independent directors and management on
sensitive issues;
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|
providing input to and assisting the Chairman in his duties;
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|
|
coordinating with the Chairman regarding information to be
provided to the independent directors in performing their duties;
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|
chairing the executive sessions of directors;
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|
|
coordinating with the Governance Committee on director,
committee and committee chair appointments; and
|
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|
|
serving as a sounding board to the Chairman regarding matters
that are appropriate or ripe for Board review or Board action,
and materials provided for Board discussions.
|
The Board is responsible for risk oversight. Management has
implemented internal processes to identify and evaluate the
risks inherent in the Companys business and to assess the
mitigation of those risks. The Audit Committee has reviewed the
risk assessments with management and provided reports to the
Board regarding the internal risk assessment processes, the
risks identified, and the mitigation strategies planned or in
place to address the risks in the business. The Board and the
Audit Committee each provide insight into the issues, based on
the experience of their members, and provide constructive
challenges to managements assumptions and assertions.
9
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Relationship with Crosstex Energy, L.P.
General.
We own (directly and indirectly)
16,414,830 common units, representing an approximate 25% limited
partnership interest, in Crosstex Energy, L.P. (the
Partnership), the 2% general partner interest in the
Partnership and the incentive distribution rights in the
Partnership. Our ability, as owner of the Partnerships
general partner, to manage and operate Crosstex Energy, L.P. and
our ownership of an approximate 25% limited partner interest
effectively gives us the ability to veto some of the
Partnerships actions and to control its management. We pay
the Partnership a fee for administrative and compensation costs
incurred by the Partnership on our behalf. During 2009, this fee
was approximately $70,000 per month.
Omnibus Agreement.
Concurrent with the closing
of the Partnerships initial public offering, we entered
into an agreement with it, Crosstex Energy GP, LLC and the
Partnerships general partner that governs potential
competition among us and the other parties to the agreement. We
agreed, for so long as the Partnerships general partner or
any of our affiliates is a general partner of the Partnership,
not to engage in the business of gathering, transmitting,
treating, processing, storing and marketing of natural gas and
the transportation, fractionation, storing and marketing of
natural gas liquids unless we first offer the Partnership the
opportunity to engage in this activity or acquire this business,
and the board of directors of Crosstex Energy GP, LLC, with the
concurrence of its conflicts committee, elects to cause it not
to pursue such opportunity or acquisition. In addition, we have
the ability to purchase a business that has a competing natural
gas gathering, transmitting, treating, processing and producer
services business if the competing business does not represent
the majority in value of the business to be acquired and we
offer the Partnership the opportunity to purchase the competing
operations following the acquisition. The noncompetition
restrictions in the omnibus agreement do not apply to the assets
retained and business conducted by us at the closing of the
Partnerships initial public offering. Except as provided
above, we and our controlled affiliates are not prohibited from
engaging in activities that compete directly with the
Partnership.
Related
Party Transactions
Reimbursement of Costs to the Partnership.
We
paid the Partnership $0.8 million, $0.7 million and
$0.6 million during the years ended December 31, 2009,
2008 and 2007, respectively, to cover our portion of
administrative and compensation costs for officers and employees
that perform services for us.
Approval and Review of Related Party
Transactions.
If we contemplate entering into a
transaction, other than a routine or in the ordinary course of
business transaction, in which a related person will have a
direct or indirect material interest, the proposed transaction
is submitted for consideration to our Board or our senior
management, as appropriate.
Renunciation
of Opportunities
In our restated charter and in accordance with the Delaware law,
we have renounced any interest or expectancy we may have in, or
being offered an opportunity to participate in, any business
opportunities, including any opportunities within those classes
of opportunity currently pursued by the Partnership, presented:
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to persons who are officers or directors of us or who, on
October 1, 2003, were, and at the time of presentation are,
stockholders of us (or to persons who are affiliates or
associates of such officers, directors or stockholders), if we
are prohibited from participating in such opportunities by the
omnibus agreement; or
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to two former affiliated stockholders, Yorktown Energy Partners
IV, L.P. and Yorktown Energy Partners V, L.P., or any
other investment fund sponsored or managed by Yorktown Partners,
LLC, including any fund still to be formed, or to any of our
directors who is an affiliate or designate of these entities.
|
10
As a result of this renunciation, these officers, directors and
stockholders should not be deemed to be breaching any fiduciary
duty to us if they or their affiliates or associates pursue
opportunities presented as described above.
Crosstex
Energy, L.P.s General Partner
The Partnerships general partner does not receive any
management fee or other compensation in connection with its
management of the Partnerships business, but it is
reimbursed for all direct and indirect expenses incurred on its
behalf. These expenses include the costs of employee, officer
and director compensation and benefits properly allocable to the
Partnership, and all other expenses necessary or appropriate to
the conduct of the business of, and allocable to, the
Partnership. The partnership agreement provides that the general
partner will determine the expenses that are allocable to the
Partnership in any reasonable manner determined by the general
partner in its sole discretion.
The Partnerships general partner owns a 2% general partner
interest in the Partnership and all of the incentive
distribution rights in the Partnership. The Partnerships
general partner is entitled to receive incentive distributions
if the amount the Partnership distributes with respect to any
quarter exceeds levels specified in the partnership agreement.
Under the quarterly incentive distribution provisions, generally
the general partner is entitled to 13% of the amounts the
Partnership distributes in excess of $0.25 per unit, 23% of the
amounts the Partnership distributes in excess of $0.3125 per
unit and 48% of amounts the Partnership distributes in excess of
$0.375 per unit.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Crosstex
Energy, Inc.
The following table shows the beneficial ownership of our Common
Stock as of February 16, 2010, held by:
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each person who beneficially owns 5% or more of the stock then
outstanding;
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all of our directors;
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|
each of our named executive officers; and
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|
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 February 16, 2010 or would be exercisable
within 60 days following February 16, 2010 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
11
community property laws where applicable. Percentages reflected
in the table below are based on a total of
46,589,022 shares of common stock outstanding as of
February 16, 2010.
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Shares of Common
|
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|
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|
Name of Beneficial Owner(1)
|
|
Stock
|
|
|
Percent
|
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|
Brave Warrior Capital, Inc.(2)
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|
4,526,099
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|
9.71
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%
|
BlackRock, Inc.(3)
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|
2,535,606
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|
5.44
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%
|
Lubar Nominees(4)
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|
1,991,877
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|
4.28
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%
|
Lubar Equity Fund, LLC(4)
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|
535,471
|
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|
1.15
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%
|
Barry E. Davis
|
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|
1,593,370
|
|
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|
3.42
|
%
|
William W. Davis
|
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|
171,511
|
|
|
|
*
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|
Joe A. Davis
|
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|
38,901
|
|
|
|
*
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|
Michael J. Garberding
|
|
|
0
|
|
|
|
*
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|
Stan Golemon
|
|
|
0
|
|
|
|
*
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|
James C. Crain(5)
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|
9,669
|
|
|
|
*
|
|
Leldon E. Echols
|
|
|
1,085
|
|
|
|
*
|
|
Bryan H. Lawrence
|
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|
1,720,267
|
|
|
|
3.69
|
%
|
Sheldon B. Lubar(4)
|
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|
16,085
|
|
|
|
*
|
|
Cecil E. Martin
|
|
|
1,085
|
|
|
|
*
|
|
Robert F. Murchison(6)
|
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|
231,521
|
|
|
|
*
|
|
All directors and executive officers as group (11 persons)
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|
6,310,842
|
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|
13.55
|
%
|
|
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|
(1)
|
|
The address of each person listed above is 2501 Cedar Springs,
Suite 100, Dallas, Texas 75201, except for BlackRock, Inc.
which is 40 East 52nd Street, New York, New York 10022; Brave
Warrior Capital, Inc. which is 12 East 49th Street, New York,
New York 10017; and Mr. Lawrence, which is 410 Park Avenue,
New York, New York 10022.
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(2)
|
|
As reported on Schedule 13 G/A filed with the SEC.
Effective as of January 1, 2010, Chieftain Capital
Management, Inc. changed its name to Brave Warrior Capital, Inc.
Bryan R. Lawrence serves as a principal of Brave Warrior
Capital, Inc. and he is the son of our director Bryan H.
Lawrence.
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(3)
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|
As reported on Schedule 13G filed with the SEC. Such person
reports that it has shared voting and dispositive power with
respect to the shares.
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|
(4)
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|
Sheldon B. Lubar is a general partner of Lubar Nominees and
director of the manager of Lubar Equity Fund, LLC, and may be
deemed to beneficially own the shares held by these entities.
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|
(5)
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|
1,000 of these shares are held by the James C. Crain Trust.
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(6)
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|
169,462 shares are 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.
|
Crosstex
Energy, L.P.
The following table shows the beneficial ownership of units of
Crosstex Energy, L.P. as of February 16, 2010, held by:
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|
each person who beneficially owns 5% or more of any class of
units then outstanding;
|
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|
all the directors of Crosstex Energy GP, LLC;
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|
each named executive officer of Crosstex Energy GP, LLC; and
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|
all the directors and executive officers of Crosstex Energy GP,
LLC as a group.
|
12
Percentages reflected in the table are based upon a total of
49,710,468 common units and 14,705,882 Series A Convertible
Preferred units as of February 16, 2010.
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|
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|
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|
|
|
|
|
|
|
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|
Percentage
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|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
of
|
|
|
Convertible
|
|
|
Percentage of
|
|
|
|
|
|
Percentage
|
|
|
|
Common
|
|
|
Common
|
|
|
Preferred
|
|
|
Preferred
|
|
|
|
|
|
of Total
|
|
|
|
Units
|
|
|
Units
|
|
|
Units
|
|
|
Units
|
|
|
Total Units
|
|
|
Units
|
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
Beneficially
|
|
Name of Beneficial Owner(1)
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Crosstex Energy, Inc.
|
|
|
16,414,830
|
|
|
|
33.02
|
%
|
|
|
0
|
|
|
|
|
*
|
|
|
16,414,830
|
|
|
|
25.48
|
%
|
GSO Crosstex Holdings LLC(2)
|
|
|
0
|
|
|
|
*
|
|
|
|
14,705,882
|
|
|
|
100.00
|
%
|
|
|
14,705,882
|
|
|
|
22.83
|
%
|
Kayne Anderson Capital Advisors, L.P.(3)
|
|
|
5,571,410
|
|
|
|
11.21
|
%
|
|
|
0
|
|
|
|
*
|
|
|
|
5,571,410
|
|
|
|
8.65
|
%
|
Barry E. Davis(4)
|
|
|
253,059
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
253,059
|
|
|
|
*
|
|
William W. Davis(4)
|
|
|
31,306
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
31,306
|
|
|
|
*
|
|
Joe A. Davis(4)
|
|
|
24,440
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
24,440
|
|
|
|
*
|
|
Michael J. Garberding
|
|
|
0
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
Stan Golemon
|
|
|
1,618
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
1,618
|
|
|
|
*
|
|
Rhys J. Best
|
|
|
44,218
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
44,218
|
|
|
|
*
|
|
Leldon E. Echols(4)
|
|
|
1,109
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
1,109
|
|
|
|
*
|
|
Bryan H. Lawrence(4)
|
|
|
0
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
Sheldon B. Lubar(4)(5)
|
|
|
358,048
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
358,048
|
|
|
|
*
|
|
Cecil E. Martin(4)
|
|
|
20,119
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
20,119
|
|
|
|
*
|
|
D. Dwight Scott
|
|
|
0
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
Kyle D. Vann
|
|
|
50,228
|
|
|
|
*
|
|
|
|
0
|
|
|
|
*
|
|
|
|
50,228
|
|
|
|
*
|
|
All directors and executive officers as a group (12 persons)
|
|
|
784,145
|
|
|
|
1.58
|
%
|
|
|
0
|
|
|
|
*
|
|
|
|
784,145
|
|
|
|
1.22
|
%
|
|
|
|
*
|
|
Less than 1%
|
|
(1)
|
|
The address of each person listed above is 2501 Cedar Springs,
Suite 100, Dallas, Texas 75201, except for GSO Crosstex
Holdings LLC, which is 280 Park Avenue, 11th Floor, New York, NY
10017, Kayne Anderson Capital Advisors, L.P., which is 1800
Avenue of the Stars, Second Floor, Los Angeles, California
90067; and Mr. Lawrence, which is 410 Park Avenue, New
York, New York 10022.
|
|
(2)
|
|
As reported on Schedule 13D filed with the SEC in a joint
filing with Blackstone / GSO Capital Solutions Fund LP,
Blackstone / GSO Capital Solutions Associates LLC, Bennett J.
Goodman, J. Albert Smith III, Douglas I. Ostrover, GSO Holdings
I LLC, Blackstone Holdings I L.P., Blackstone Holdings I/II GP
Inc., The Blackstone Group L.P., Blackstone Group Management
L.L.C., and Stephen A. Schwarzman.
|
|
(3)
|
|
As reported on Schedule 13G filed with the SEC in a joint
filing with Richard A. Kayne. Such persons report shared voting
and dispositive power with respect to the units.
|
|
(4)
|
|
These individuals each hold an ownership interest in Crosstex
Energy, Inc. as indicated in the preceding table.
|
|
(5)
|
|
Sheldon B. Lubar is a general partner of Lubar Nominees, which
holds an ownership interest in Crosstex Energy, Inc. (as
indicated in the preceding table). Mr. Lubar is also a
director of the manager of Lubar Equity Fund, LLC, which holds
an ownership interest in Crosstex Energy, Inc. (as indicated in
the preceding table) and owns 323,107 Units of Crosstex Energy,
L.P.
|
13
EXECUTIVE
COMPENSATION
Our named executive officers also serve as executive officers of
Crosstex Energy GP, LLC, our wholly owned subsidiary and the
general partner of the general partner of Crosstex Energy, L.P.,
and the compensation of the named executive officers discussed
below reflects total compensation for services to all Crosstex
entities. We pay all expenses incurred on our behalf, including
the costs of employee, officer and director compensation and
benefits, as well as all other expenses necessary or appropriate
to the conduct of our business. We currently pay a monthly fee
to Crosstex Energy, L.P. to cover our portion of administrative
and compensation costs, including compensation costs relating to
the named executive officers.
Based on the information that we track regarding the amount of
time spent by each of our named executive officers on business
matters relating to Crosstex Energy, Inc, we estimate that such
officers devoted the following percentage of their time to the
business of Crosstex Energy, Inc. and to Crosstex Energy, L.P.,
respectively, for 2009:
|
|
|
|
|
|
|
|
|
|
|
Percentage of Time
|
|
Percentage of Time
|
|
|
Devoted to Business of
|
|
Devoted to Business of
|
Executive Officer or Director
|
|
Crosstex Energy, Inc.
|
|
Crosstex Energy, L.P.
|
|
Barry E. Davis
|
|
|
17
|
%
|
|
|
83
|
%
|
William W. Davis
|
|
|
26
|
%
|
|
|
74
|
%
|
Joe A. Davis
|
|
|
12
|
%
|
|
|
88
|
%
|
Michael J. Garberding
|
|
|
6
|
%
|
|
|
94
|
%
|
Stan Golemon
|
|
|
|
|
|
|
100
|
%
|
Compensation
Committee Report
Each member of Crosstex Energy, Inc.s Compensation
Committee is an independent director in accordance with NASDAQ
standards. The Committee has reviewed and discussed with
management the following section titled Compensation
Discussion and Analysis. Based upon its review and
discussions, the Committee has recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy
statement.
Cecil E. Martin (Chairman)
Robert F. Murchison
Compensation
Discussion and Analysis
The Charter of the Compensation Committee includes the following:
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The Committee has general oversight responsibility for the
Companys compensation plans, policies and programs. This
general oversight responsibility includes reviewing and
approving compensation policies and practices for all employees,
overall payroll, bonus plans, overall bonus payouts, setting
bonus targets, and other general compensation matters.
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Not less than annually, the Committee will review the
Companys executive compensation plans and policies. The
Committee will review the corporate goals and objectives
relevant to the compensation of the Chief Executive Officer, the
other executive officers, and each other senior officer that the
Committee or the Board may designate (collectively referred to
as the Executive Officers). The Committee will
evaluate the performance of the Chief Executive Officer, and
together with the Chief Executive Officer, the performance of
each other Executive Officer. The Committee will at least
annually review each Executive Officers base compensation,
bonus, awards under the Companys Long Term Incentive
Plans, and any other compensation, and make recommendations to
the Board regarding each Executive Officers compensation.
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The Committee will review and approve the terms of any
employment contracts, severance agreements, or other contracts
with any Executive Officer, provided that the Board reserves to
itself the approval of the compensation of the Executive
Officers.
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In order to compete effectively in our industry, it is critical
that we attract, retain and motivate leaders that are best
positioned to deliver financial and operational results that
benefit our stockholders. It is the Committees
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responsibility to design and administer compensation programs
that achieve these goals, and to make recommendations to the
Board to approve and adopt these programs.
Compensation Philosophy and Principles
Our executive compensation is designed to attract, retain and
motivate top-tier executives, and align their individual
interests with the interests of the stockholders. The
compensation of each of our executives is comprised of base
salary, bonus opportunity and restricted equity grants or option
awards under long term incentive plans. The Committees
philosophy is to generally target the 50th percentile of
our Peer Group (discussed below) for base salaries, target the
50th percentile of our Peer Group for bonuses (but retain
discretion to reduce or increase bonus amounts to address
individual performance), and to provide executives the
opportunity to earn long-term compensation, in the form of
equity, in the top quartile relative to our Peer Group.
The Committee considers the following principles in determining
the total compensation of the named executive officers:
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in order to achieve our goals, it is critical that we attract,
retain and motivate highly qualified executive officers;
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base salary and bonus opportunities must be competitive in order
to attract, retain and motivate highly qualified executive
officers;
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equity incentive compensation should represent a significant
portion of the executives total compensation in order to
retain and incentivize highly qualified executives, and align
their individual long term interests with the interests of
stockholders;
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compensation programs must be sufficiently flexible to address
special circumstances, which have included payments under
retention plans specifically targeted to retain highly qualified
officers during challenging times; and
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the overall compensation program should drive performance and
reward contributions in support of our business strategies and
achievements.
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Compensation Methodology
Annually, the Committee reviews our executive compensation
program in total and each element of compensation specifically.
The review includes an analysis of the compensation practices of
other companies in our industry, the competitive market for
executive talent, the evolving demands of the business, specific
challenges that we may face, and individual contributions. The
Committee recommends to the Board adjustments to the overall
compensation program and to its individual components as the
Committee determines necessary to achieve our goals. The
Committee periodically retains consultants to assist in its
review and to provide input regarding its compensation program
and each of its elements.
In 2009, the Committee retained BDO Seidmann, LLC
(BDO) as its independent compensation consultant to
conduct a compensation review and advise the Committee on
certain matters relating to compensation programs applicable to
the named executive officers and other employees of Crosstex
Energy GP, LLC. BDO provided a report and presentation to the
Committee regarding the compensation programs of the Crosstex
entities dated June 17, 2009.
With respect to compensation objectives and decisions regarding
the named executive officers for fiscal 2009, the Committee has
reviewed market data with respect to peer companies provided by
BDO in determining relevant compensation levels and compensation
program elements for our named executive officers, including
establishing their respective base salaries. In addition, BDO
has also provided guidance on current industry best practices to
the Committee. During 2009 Mercer Human Resource Consulting also
provided the Committee with data that it utilized in evaluating
its compensation policies. The market data that we reviewed
included the base salaries paid to executive officers in similar
positions at our peer companies, as well as a comparison of the
mix of total compensation (including base salary, bonus
structure, bonus methodology and short and long-term
compensation elements) paid to executive officers in similar
positions at such companies. For 2009, we identified the
following companies as Peer Companies for comparison
purposes: Energy Transfer Partners, L.P., Enbridge Energy
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Partners, L.P., ONEOK Partners, L.P., Southern Union, Magellan
Midstream Holdings, L.P., NuStar Energy, L.P., Copano Energy,
LLC, Regency Energy Partners, L.P., MarkWest Energy Partners,
L.P., Boardwalk Pipeline Partners, L.P., Atmos Energy
Corporation, El Paso Corporation, Questar Corporation, EQT
Corporation, Pioneer Natural Resources Company, Plains
Exploration & Production Company, Cabot
Oil & Gas Corporation, St. Mary Land &
Exploration Company and Range Resources Corporation. We believe
that this group of companies is representative of the industry
in which we operate and the individual companies were chosen
because of such companies relative position in our
industry, their relative size/market capitalization, the
relative complexity of the business, similar organizational
structure, competition for similar executive talent, and the
named executive officers roles and responsibilities.
In addition, the Committee has reviewed various relevant
compensation surveys with respect to determining compensation
for the named executive officers. In determining the long-term
incentive component of compensation of our senior executives
(including the named executive officers), the Committee
considers individual performance and relative equity holder
benefit, the value of similar incentive awards to senior
executives at comparable companies, awards made to the
companys senior executives in past years, the value of all
unvested awards held by the executive, and such other factors as
the Committee deems relevant.
Elements of Compensation
The primary elements of our compensation program are a
combination of annual cash and long-term equity-based
compensation. For fiscal year 2009, the principal elements of
compensation for the named executive officers were the following:
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base salary;
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bonuses and annual cash bonus plan awards;
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long-term incentive plan awards; and
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retirement and health benefits.
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The Committee reviews and makes recommendations regarding the
mix of compensation, both among short and long-term compensation
and cash and non-cash compensation, to establish structures that
it believes are appropriate for each of the named executive
officers. We believe that the mix of base salary, cash bonus
awards, awards under the long-term incentive plan, retirement
and health benefits and perquisites and other compensation fit
our overall compensation objectives. We believe this mix of
compensation provides competitive compensation opportunities to
align and drive employee performance in support of our business
strategies and to attract, motivate and retain high quality
talent with the skills and competencies that we require.
Base Salary
.
The Committee recommends
base salaries for the named executive officers based on the
historical salaries for services rendered to us and our
affiliates, market data and responsibilities of the named
executive officers. Salaries are generally determined by
considering the employees performance and prevailing
levels of compensation in areas in which a particular employee
works. As discussed above, except with respect to the monthly
reimbursement payment that we make to Crosstex Energy, L.P., all
of the base salaries of the named executive officers were
allocated to Crosstex Energy, L.P. as general and administration
expenses. The base salaries paid to our named executive officers
during fiscal year 2009 are shown in the Summary Compensation
Table on page 25. We did not make any adjustments in the
base salaries of our named executive officers in 2009. Effective
January 1, 2010, the base salaries payable to our named
executive officers were adjusted to equal the following: Barry
E. Davis $435,000, William W. Davis $330,000; Joe A. Davis
$300,000; Stan Golemon $230,000 and Michael Garberding $215,000.
Bonuses and Annual Cash Bonus Plan
Awards
.
The Committee oversees the Annual
Cash Bonus Plan and makes recommendations regarding cash bonuses
to be awarded to each of the named executive officers. The
Annual Cash Bonus Plan is applicable to all employees. Under the
plan, bonuses are awarded to our named executive officers based
on a formulaic approach that is initially determined using a
performance metric tied to the Adjusted EBITDA (earnings before
interest, income taxes, depreciation and amortization, non-cash
mark-to-market
items and other miscellaneous non-cash items) of Crosstex
Energy, L.P. The same adjusted EBITDA performance metric is used
for bonuses for all employees. The adjusted EBITDA goals are
determined at the beginning of the year by
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our Board, upon the recommendation of the Committee.
Discretionary bonuses in addition to bonuses under the Annual
Cash Bonus Plan are awarded from time to time by the Committee
to reward outstanding service to the Company.
Approximately two-thirds of the bonuses calculated under the
formula applicable to each of our named executive officers for
fiscal 2009 are strictly formulaic and nondiscretionary. The
remaining one-third of the amount determined by the formula is
at the discretion of the Committee, based upon the
Committees assessment of the executives meeting his
or her performance objectives established at the beginning of
the performance period. These performance objectives include the
quality of leadership within the named executive officers
assigned area of responsibility, the achievement of technical
and professional proficiencies by the named executive officer,
the execution of identified priority objectives by the named
executive officer and the named executive officers
contribution to, and enhancement of, the desired company
culture. These performance objectives are reviewed and evaluated
by our Committee as a whole. All of our named executive officers
met or exceeded their personal performance objectives for 2009.
The Committee believes that a portion of executive compensation
must remain discretionary, and exercises its discretion with
respect to a portion of the cash bonus awards payable to its
named executive officers. The Committee may exercise its
discretion to reduce the amount calculated under the formula as
described above, or to supplement the amount to reward or
address extraordinary individual performance, challenges and
opportunities not reasonably foreseeable at the beginning of a
performance period, internal equities, and external competition
or opportunities.
Target adjusted EBITDA is based upon a standard of reasonable
market expectations and company performance, and varies from
year to year. Several factors are reviewed in determining target
adjusted EBITDA, including market expectations, internal
forecasts and available investment opportunities. For 2009, our
targets for bonuses, after adjustments to account for the
effects of discontinued operations and certain other
adjustments, were $185.5 million for minimum bonuses,
$203.5 million for mid-point bonuses and
$252.5 million for maximum bonuses. The 2009 plan provided
for named executive officers to receive bonus payouts of 10% at
the minimum threshold, payouts ranging from 35% to 90% at the
mid-point target and maximum payouts ranging from 60% to 180% of
an executive officers base salary. We met the target for
mid-point bonuses in 2009.
For 2010, the Board has approved a continuation of the Annual
Cash Bonus Plan with adjusted EBITDA as the performance metric.
Under the 2010 plan, bonuses will be determined based on
adjusted EBITDA levels ranging from a threshold of
$165.0 million to a maximum of $210.0 million, with a
mid-point adjusted EBITDA of $185.0 million.
The Board has also approved payments to our named executive
officers and certain other senior executives and key leaders
under a Key Employee Retention Plan for 2009 and the first six
months of 2010. Under the 2009 plan, Barry E. Davis, William W.
Davis and Joe A. Davis received retention payments in quarterly
installments equal to 20% of base salary for the first three
quarters of the year and 40% of base salary for the fourth
quarter, and Stan Golemon and Michael J. Garberding received
retention payments in quarterly installments equal to 12% of
base salary for the first three quarters of the year and 24% of
base salary for the fourth quarter. Under the 2010 plan,
participants will receive quarterly retention payments equal to
20% of base salary for each of the first two quarters of the
year, provided that the participant is employed by our
partnership at the time of payment. In the case of a participant
who is terminated by us without cause, such participant will
receive a prorated payment based on time of employment. Payments
made under the Key Employee Retention Plan are credited against
payments that would otherwise be payable to a participant under
the Annual Cash Bonus Plan. The Key Employee Retention Plan is
designed to retain and incentivize employees that are very
important for the accomplishment of the Partnerships
objectives during critical times. Participation in the plan is
at the discretion of the Committee and the Board.
Long-Term Incentive Plans
.
Our officers
and directors are eligible to participate in long-term incentive
plans adopted by each of Crosstex Energy, Inc. and Crosstex
Energy GP, LLC. We believe that equity awards are instrumental
in attracting, retaining, and motivating employees, and align
the interests of our officers and directors with the interests
of the stockholders. Our Board, at the recommendation of the
Committee, approves the grants of our stock or options to our
executive officers. The Committee believes that equity
compensation should comprise a significant portion of a named
executive officers compensation, and considers a number of
factors when
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determining the grants to each individual. The considerations
include: the general goal of allowing the named executive
officer the opportunity to earn aggregate equity compensation
(comprised of our stock and Partnership units) in the upper
quartile of our Peer Group; the amount of unvested equity held
by the individual executive; the executives performance;
and other factors as determined by the Committee. A discussion
of each plan follows:
Crosstex Energy, Inc. Long-Term Incentive
Plans.
The Companys long-term incentive
plans provide for the award of stock options and restricted
stock (collectively, Awards) for up to
7,190,000 shares of our common stock. As of January 1,
2010, approximately 2,230,800 shares remained available
under the long-term incentive plans for future issuance to
participants. A participant may not receive in any calendar year
options relating to more than 250,000 shares of common
stock. The maximum number of shares set forth above are subject
to appropriate adjustment in the event of a recapitalization of
our capital structure or our reorganization. Shares of common
stock underlying Awards that are forfeited, terminated or expire
unexercised become immediately available for additional Awards
under the long-term incentive plan.
The Committee administers the long-term incentive plans. 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 long-term
incentive 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 our Board.
The Committee will determine the type or types of Awards made
under the plans 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 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 plans or any other employee benefit
plan of the company. All or part of an Award may be subject to
conditions established by the Committee, including continuous
service with the company.
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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.
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Restricted Stock Awards.
Stock awards consist
of restricted shares of our common stock. The 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 Committee. Restricted stock awards will
have a vesting period established in the sole discretion of the
Committee, provided that the Compensation Committee may provide
for earlier vesting by reason of death, disability, retirement
or otherwise.
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Performance Shares.
A performance share
represents a contractual commitment to grant restricted shares
in the future if certain conditions are satisfied. In the past,
performance share agreements have only been entered into with
members of our senior management. We did not grant any
performance share agreements in 2009. Under the terms of past
performance share agreements, to be eligible to receive the
restricted shares, the executive officer must continuously be
employed from the date of the agreement through January 1 of the
third calendar year following such date, and no shares will be
credited to an award recipient under our long term incentive
plan until such future date. Each agreement provides for a
target number of shares that are to be granted in the future. As
of March 1, 2010, only performance shares granted in 2008
remain outstanding. Under the 2008 grant, the target number of
shares will be increased (up to a maximum of 300% of the target
number of shares) or decreased (to a minimum of 30% of the
target number of shares) based on Crosstex
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Energy, L.P.s average growth rate (defined as the
percentage increase or decrease in distributable cash flow per
common unit) compared to the target growth rate of 9%. The
restricted shares that are granted pursuant to the 2008
performance share agreements will vest and become unrestricted
as of March 1, 2011 if the executive officer remains an
employee through such date. The performance shares granted in
2007 that did not lapse vested at the minimum amount of 30% of
the target number of units and became unrestricted units as of
March 1, 2010.
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The Board may amend, modify, suspend or terminate the long-term
incentive plans 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, our Board shall substitute or adjust, as applicable:
(i) the number of shares of common stock reserved under the
plans and the number of shares of common stock available for
issuance pursuant to specific types of Awards as described in
the plans, (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.
The total value of the equity compensation granted to our
executive officers generally has been awarded 50% in restricted
units of Crosstex Energy, L.P. and 50% in our restricted stock.
In addition, our executive officers may receive additional
grants of equity compensation in certain circumstances, such as
promotions. For fiscal year 2009, we granted 104,167, 91,667,
91,667, 29,167 and 41,667 restricted shares to Barry E. Davis,
William W. Davis, Joe A. Davis, Michael J. Garberding, and Stan
Golemon, respectively. All performance and restricted shares
that we grant are charged against earnings according to FASB ASC
718.
Crosstex Energy GP, LLC Long-Term Incentive
Plan.
Crosstex Energy GP, LLC has adopted a
long-term incentive plan for employees and directors of Crosstex
Energy GP, LLC and its affiliates who perform services for it.
The long-term incentive plan is administered by the Compensation
Committee of Crosstex Energy GP, LLCs board of directors
and permits the grant of awards covering an aggregate of
5,600,000 common units, which may be awarded in the form of
restricted units or unit options. Of the 5,600,000 common units
that may be awarded under the long-term incentive plan,
1,401,982 common units remain eligible for future grants by
Crosstex Energy GP, LLC as of January 1, 2010. The
long-term compensation structure is intended to align the
employees performance with long-term performance for
Crosstex Energy, L.P.s unitholders.
Crosstex Energy GP, LLCs board of directors in its
discretion may terminate or amend the long-term incentive plan
at any time with respect to any units for which a grant has not
yet been made. Crosstex Energy GP, LLCs board of directors
also has the right to alter or amend the long-term incentive
plan or any part of the plan from time to time, including
increasing the number of units that may be granted subject to
the approval requirements of the exchange upon which the common
units are listed at that time. However, no change in any
outstanding grant may be made that would materially impair the
rights of the participant without the consent of the participant.
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Unit Options.
The long-term incentive plan
currently permits the grant of options covering common units.
Under current policy all unit option grants will have an
exercise price equal to or more than the fair market value of
the units on the date of grant. In general, unit options granted
will become exercisable over a period determined by the
Committee. In addition, the unit options will become exercisable
upon a change in control of Crosstex Energy, L.P. or its general
partner, as discussed below under Potential Payments Upon
a Change of Control or Termination. Upon exercise of a
unit option, Crosstex Energy GP, LLC will acquire common units
in the open market or directly from Crosstex Energy, L.P. or any
other person or use common units already owned, or any
combination of the foregoing. Crosstex Energy GP, LLC will be
entitled to reimbursement by Crosstex Energy, L.P. for the
difference between the cost incurred by it in acquiring
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these common units and the proceeds received by it from an
optionee at the time of exercise. Thus, the cost of the unit
options will be borne by Crosstex Energy, L.P. If Crosstex
Energy, L.P. issues new common units upon exercise of the unit
options, the total number of common units outstanding will
increase, and Crosstex Energy GP, LLC will pay Crosstex Energy,
L.P. the proceeds it received from the optionee upon exercise of
the unit option. The unit option plan has been designed to
furnish additional compensation to employees and directors and
to align their economic interests with those of common
unitholders.
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Restricted Units.
A restricted unit is a
phantom unit that entitles the grantee to receive a
common unit upon the vesting of the phantom unit. In the future,
the Committee may make grants under the plan to employees and
directors containing such terms as it shall determine under the
plan. The Committee may base its determination upon the
achievement of specified financial objectives. In addition, the
restricted units will vest upon a change of control of Crosstex
Energy, L.P. or its general partner, as discussed below under
Potential Payments Upon a Change of Control or
Termination. Common units to be delivered upon the vesting
of restricted units may be common units acquired by Crosstex
Energy GP, LLC in the open market, common units already owned by
Crosstex Energy GP, LLC, common units acquired by Crosstex
Energy GP, LLC directly from Crosstex Energy, L.P. or any other
person or any combination of the foregoing. Crosstex Energy GP,
LLC will be entitled to reimbursement by Crosstex Energy, L.P.
for the cost incurred in acquiring common units. If we issue new
common units upon vesting of the restricted units, the total
number of common units outstanding will increase. The
Compensation Committee of the board of directors of Crosstex
Energy GP, LLC, in its discretion, may grant tandem distribution
equivalent rights with respect to restricted units which
entitles the grantee to distributions attributable to the
restricted units prior to vesting of such units. Crosstex
Energy, L.P. intends the issuance of the common units upon
vesting of the restricted units under the plan to serve as a
means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity
appreciation of the common units. Therefore, under current
policy, plan participants will not pay any consideration for the
common units they receive, and we will receive no remuneration
for the units.
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Performance Units.
A performance unit
represents a contractual commitment to grant restricted units in
the future if certain conditions are satisfied. In the past
performance unit agreements have only been entered into with
members of Crosstex Energy GP, LLCs senior management. In
2009, no performance unit agreements were granted. Under the
terms of past performance unit agreements, to be eligible to
receive the restricted units, the executive officer must
continuously be employed from the date of the agreement through
January 1 of the third calendar year following such date, and no
units will be credited to an award recipient under Crosstex
Energy GP, LLCs long term incentive plan until such future
date. Each agreement provides for a target number of units that
are to be granted in the future. As of March 1, 2010, only
performance units granted in 2008 remain outstanding. Under the
2008 grant, the target number of units will be increased (up to
a maximum of 300% of the target number of units) or decreased
(to a minimum of 30% of the target number of units) based on
Crosstex Energy, L.P.s average growth rate (defined as the
percentage increase or decrease in distributable cash flow per
unit) compared to the target growth rate of 9.0%. The restricted
units that are granted pursuant to the 2008 performance unit
agreements will vest and become unrestricted as of March 1,
2011 if the executive officer remains an employee through such
date. The performance units granted in 2007 that did not lapse
vested at the minimum amount of 30% of the target number of
units and became unrestricted units as of March 1, 2010.
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The total value of the equity compensation granted to Crosstex
Energy GP, LLCs named executive officers generally has
been allocated 50% in restricted units of Crosstex Energy, L.P.
and 50% in our restricted stock. For fiscal year 2009, Crosstex
Energy GP, LLC granted 104,167, 91,667, 91,667, 29,167 and
41,667 restricted units to Barry E. Davis, William W. Davis, Joe
A. Davis, Michael J. Garberding, and Stan Golemon, respectively.
All performance and restricted units that Crosstex Energy GP,
LLC grant are charged against earnings according to FASB ASC 718.
Retirement and Health Benefits.
We offer a
variety of health and welfare and retirement programs to all
eligible employees. The named executive officers are generally
eligible for the same programs on the same basis as our other
employees. We maintain a tax-qualified 401(k) retirement plan
that provides eligible employees with an opportunity to save for
retirement on a tax deferred basis. In 2009, we matched 100% of
every dollar contributed for
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contributions of up to 6% of salary (not to exceed the maximum
amount permitted by law) made by eligible participants. The
retirement benefits provided to the named executive officers
were allocated to us as general and administration expenses. Our
executive officers are also eligible to participate in any
additional retirement and health benefits available to our other
employees.
Perquisites and Other Compensation.
We
generally do not pay for perquisites for any of the named
executive officers, other than payment of dues, sales tax and
related expenses for membership in an industry related private
lunch club (totaling less than $2,500 per year per person).
Employment
and Severance Agreements
Barry E. Davis, William W. Davis, and Joe A. Davis have entered
into employment agreements with Crosstex Energy GP, LLC. All of
these employment agreements are substantially similar. Each of
the employment agreements has a term of one year that will
automatically be extended such that the remaining term of the
agreements will not be less than one year. The employment
agreements include obligations not to disclose confidential
information and also provide for a noncompetition period that
will continue for one year after the termination of the
employees employment or the date on which the employee is
no longer entitled to receive payments under the employment
agreement. During the noncompetition period, the employees are
generally prohibited from engaging in any business that competes
with us or our affiliates in areas in which we conduct business
as of the date of termination and from soliciting or inducing
any of our employees to terminate their employment with us.
Stan Golemon and Michael Garberding have entered into Severance
Agreements with Crosstex Energy GP, LLC. These agreements are
substantially similar and provide for severance payable to the
employee if their employment is terminated without cause before
December 31, 2010 or in the event of a change in control
(as defined in the Severance Agreements). Crosstex Energy GP,
LLC has entered into similar Severance Agreements with other
senior management and certain other key leaders.
Potential
Payments Upon a Change of Control or Termination
Under the employment and severance agreements with our named
executive officers, we may be required to pay certain amounts
upon a change of control of us or our affiliates or upon the
termination of the executive officer in certain circumstances.
Except in the event of our becoming bankrupt or ceasing
operations, termination for cause or termination by the employee
other than for good reason, or if a change in control occurs
during the term of an employees employment and either
party to the agreement terminates the employees employment
as a result thereof, the employment and severance agreements
entered into between Crosstex Energy GP, LLC and each of the
named executive officers provide for continued salary payments,
accrued bonuses and benefits following termination of employment
for the one year period following termination. The terms
contained in the employment and severance agreements were
established at the time we entered into such agreements with our
named executive officers. These terms were determined based on
past practice and our understanding of similar agreements
utilized by public companies generally at the time we entered
into such agreements. The determination of the reasonable
consequences of a change of control is periodically reviewed by
the Committee. For purposes of the employment and severance
agreements:
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|
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|
|
the employee has failed to perform the duties assigned to him
and such failure has continued for 30 days following
delivery by Crosstex Energy GP, LLC of written notice to the
employee of such failure;
|
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|
|
the employee has been convicted of a felony or misdemeanor
involving moral turpitude;
|
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|
|
the employee has engaged in acts or omissions against Crosstex
Energy GP, LLC constituting dishonesty, breach of fiduciary
obligation or intentional wrongdoing or misfeasance;
|
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|
|
the employee has acted intentionally or in bad faith in a manner
that results in a material detriment to the assets, business or
prospects of Crosstex Energy GP, LLC; or
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|
|
the employee has breached any obligation under the employment
agreement, if applicable.
|
21
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Good Reason includes any of the following:
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|
|
the assignment to employee of any duties materially inconsistent
with the employees position (including a materially
adverse change in the employees office, title and
reporting requirements), authority, duty or responsibilities;
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|
Crosstex Energy GP, LLC requiring the employee to be based at
any office other than the offices in the greater Dallas, Texas
area;
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|
regarding the severance agreements, any reduction in the
employees base salary; and
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|
|
regarding the employment agreements, any termination by Crosstex
Energy GP, LLC of the employees employment other than as
expressly permitted by the employment agreement, or a breach or
violation by Crosstex Energy GP, LLC of any material provision
of the employment agreement, which breach or violation remains
unremedied for more than 30 days after written notice
thereof is given to Crosstex Energy GP, LLC by the employee.
|
No act or failure to act on Crosstex Energy GP, LLCs part
shall be considered good reason unless the employee
has given Crosstex Energy GP, LLC written notice of such act or
failure to act within 30 days thereof and Crosstex Energy
GP, LLC fails to remedy such act or failure to act within
30 days of its receipt of such notice.
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|
A change in control shall be deemed to have occurred:
|
|
|
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|
|
under the employment agreements, (i) if Crosstex Energy,
Inc.
and/or
its affiliates, collectively, no longer directly or indirectly
hold a controlling interest in Crosstex Energy GP, L.P. or
Crosstex Energy GP, LLC and the named executive officer does not
remain employed by Crosstex Energy GP, LLC upon the occurrence
of such event (whether the employees employment is
terminated voluntarily or by Crosstex Energy GP, LLC);
(ii) upon the consummation of any transaction as a result
of which any person (other than Yorktown Partners LLC, or its
affiliates including any funds under its management) becomes the
beneficial owner (as defined in
Rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly
or indirectly, of at least 50% of the total voting power
represented by the outstanding voting securities of Crosstex
Energy, Inc. at a time when Crosstex Energy, Inc. still
beneficially owns 50% or more of the voting power of the
outstanding equity interests of Crosstex Energy GP, L.P. or
Crosstex Energy GP, LLC; or (iii) Crosstex Energy GP, LLC
has caused the sale of at least 50% of our assets; or
|
|
|
|
under the severance agreements, if (i) a person or group of
persons acting together acquire more than 50% of the currently
issued and outstanding equity securities of Crosstex Energy,
Inc. in one transaction or a series of transactions (provided,
however, that Crosstex Energy, Inc.s issuance of
additional equity securities to a person or persons that, after
such issuance, comprise more than 50% of the issued and
outstanding equity securities of Crosstex Energy, Inc. is not a
Change in Control); (ii) individuals who
constitute the Board as of the date of the severance agreement
(the Incumbent Board) cease for any reason to
constitute at least a majority of the Board (provided, however,
that any individual becoming a director subsequent to the date
of the agreement whose election by the Board was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
was a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an election contest with respect to the
election or removal of directors or other solicitation of
proxies or consents by or on behalf of a person other than the
Board); or (iii) all or substantially all of our assets
have been sold, transferred or are otherwise owned by an entity
that is not directly or indirectly controlled or governed by
Crosstex Energy, Inc.
|
If a termination of a named executive officer by us other than
for cause, a termination by a named executive officer for good
reason or upon a change in control were to have occurred as of
December 31, 2009, our named executive officers would have
been entitled to the following:
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|
|
|
|
Barry E. Davis would have received $435,000 representing base
salary for the remainder of the term of the employment agreement
(i.e., one years salary paid at regularly scheduled
times), $391,500 representing bonuses earned under any incentive
plans in which he is a participant earned up to the date of
termination or
|
22
|
|
|
|
|
change in control (less any advance bonus payments previously
made), and continued participation in Crosstex Energy GP,
LLCs health plans for the remainder of the term of the
employment agreement;
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|
|
|
|
|
William W. Davis would have received $315,000 representing base
salary for the remainder of the term of the employment agreement
(i.e., one years salary paid at regularly scheduled
times), $204,750 representing bonuses earned under any incentive
plans in which he is a participant earned up to the date of
termination or change in control (less any advance bonus
payments previously made), and continued participation in
Crosstex Energy GP, LLCs health plans for the remainder of
the term of the employment agreement;
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|
|
|
Joe A. Davis would have received $285,000 representing base
salary for the remainder of the term of the employment agreement
(i.e., one years salary paid at regularly scheduled
times), $185,250 representing bonuses earned under any incentive
plans in which he is a participant earned up to the date of
termination or change in control (less any advance bonus
payments previously made), and continued participation in
Crosstex Energy GP, LLCs health plans for the remainder of
the term of the employment agreement;
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|
|
|
Michael J. Garberding would have received $198,000 representing
one year base salary (paid in a lump sum), $69,300 representing
bonuses earned under any incentive plans in which he is a
participant earned up to the date of termination or change in
control (less any advance bonus payments previously made), and
an amount equal to his cost under COBRA to extend medical
insurance benefits for a period of one year; and
|
|
|
|
Stan Golemon would have received $220,000 representing one year
base salary (paid in a lump sum), $77,000 representing bonuses
earned under any incentive plans in which he is a participant
earned up to the date of termination or change in control (less
any advance bonus payments previously made), and an amount equal
to his cost under COBRA to extend medical insurance benefits for
a period of one year.
|
Long-Term Incentive Plans.
With respect to the
Long-Term Incentive Plans, the amounts to be received by our
named executive officers in these circumstances will be
automatically determined based on the number of unvested stock
or unit awards or restricted stock or units held by a named
executive officer at the time of a change in control. The terms
of the Long-Term Incentive Plans were determined based on past
practice and our understanding of similar plans utilized by
public companies generally at the time we adopted such plans.
The determination of the reasonable consequences of a change of
control is periodically reviewed by the Compensation Committee.
Crosstex Energy, Inc. Long-Term Incentive
Plan.
Under current policy, if a grantees
employment is terminated for any reason other than death or
disability, depending on the particular terms of the agreement
in question, a grantees options and restricted shares that
have been granted may automatically be forfeited unless, and to
the extent, our Compensation Committee provides otherwise. With
respect to performance shares, however, in the case of a
termination without cause or for good reason, the pro-rata
portion of the number of shares that have accrued to the date of
termination will vest and become payable to the participant. A
grantees options, restricted shares and performance shares
will generally vest in the event of death or disability.
Immediately prior to a change of control of the
Company, all option awards, restricted stock awards and
performance shares will automatically vest and become payable or
exercisable, as the case may be, in full and all vesting periods
will terminate.
For purposes of the long-term incentive plans, a change of
control means: (i) the consummation of a merger or
consolidation of Crosstex Energy, Inc. with or into another
entity or any other transaction, if persons who were not
shareholders of Crosstex Energy, Inc. 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 (a) the continuing or surviving
entity and (b) any direct or indirect parent entity of such
continuing or surviving entity; (ii) the sale, transfer or
other disposition of all or substantially all of Crosstex
Energy, Inc.s assets; (iii) a change in the
composition of the board of directors of Crosstex Energy, Inc.
as a result of which fewer than 50% of the incumbent directors
are directors who either (a) had been directors of Crosstex
Energy, Inc. on the date 12 months prior to the date of the
event that may constitute a change of control (the
original directors) or (b) were elected, or
nominated for election, to the board of directors of Crosstex
Energy, Inc. 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 (iv) any transaction as a result of which any
person is the beneficial owner (as defined in
Rule 13d-3
under the
23
Exchange Act), directly or indirectly, of securities of Crosstex
Energy, Inc. representing at least 50% of the total voting power
represented by Crosstex Energy, Inc.s then outstanding
voting securities.
If a change in control were to have occurred as of
December 31, 2009, options, restricted stock and
performance shares held by the named executive officers would
have automatically vested and become payable or exercisable, and
any vesting periods of restricted stock would have terminated,
as follows:
|
|
|
|
|
Barry E. Davis held 104,167 shares of restricted stock and
213,744 performance shares that would have become fully vested,
payable
and/or
exercisable as a result of such change in control;
|
|
|
|
William W. Davis held 91,667 shares of restricted stock and
103,035 performance shares that would have become fully vested,
payable
and/or
exercisable as a result of such change in control;
|
|
|
|
Joe A. Davis held 91,667 shares of restricted stock and
87,634 performance shares that would have become fully vested,
payable
and/or
exercisable as a result of such change in control;
|
|
|
|
Michael J. Garberding held 34,079 shares of restricted
stock would have become fully vested, payable
and/or
exercisable as a result of such change in control; and
|
|
|
|
Stan Golemon held 48,167 shares of restricted stock would
have become fully vested, payable
and/or
exercisable as a result of such change in control.
|
Crosstex Energy GP, LLC Long-Term Incentive
Plan.
Under current policy, if a grantees
employment is terminated for any reason other than death or
disability, depending on the particular terms of the agreement
in question, a grantees unit options and restricted units
granted under the long-term incentive plan may automatically be
forfeited unless, and to the extent, the Committee provides
otherwise. With respect to performance units, however, in the
case of a termination without cause or for good reason, the
pro-rata portion of the number of units that have accrued to the
date of termination will vest and become payable to the
participant. A grantees options, restricted units and
performance units will generally vest in the event of death or
disability. Upon a change in control of Crosstex Energy, L.P. or
its general partner, all unit options, restricted units and
performance units will automatically vest and become payable or
exercisable, as the case may be, in full and any restricted
periods or performance criteria shall terminate or be deemed to
have been achieved at the maximum level.
For purposes of the long-term incentive plan, a change in
control means, and shall be deemed to have occurred upon:
(i) the consummation of a merger or consolidation of
Crosstex Energy GP, LLC with or into another entity or any other
transaction if persons who were not holders of equity interests
of Crosstex Energy GP, LLC immediately prior to such merger,
consolidation or other transaction, own 50% or more of the
voting power of the outstanding equity interests of the
continuing or surviving entity; (ii) the sale, transfer or
other disposition of all or substantially all of Crosstex Energy
GP, LLCs or our assets; (iii) a change in the
composition of the board of directors as a result of which fewer
than 50% of the incumbent directors are directors who either had
been directors of Crosstex Energy GP, LLC on the date
12 months prior to the date of the event that may
constitute a change in control (the original
directors) or were elected, or nominated for election, to
the board of directors of Crosstex Energy GP, LLC 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 (iv) the
consummation of any transaction as a result of which any person
(other than Yorktown Partners LLC, or its affiliates including
any funds under its management) becomes the beneficial
owner (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of Crosstex Energy, Inc. representing at least 50% of the total
voting power represented by Crosstex Energy, Inc.s then
outstanding voting securities at a time when Crosstex Energy,
Inc. still beneficially owns more than 50% of securities of
Crosstex Energy GP, LLC representing at least 50% of the total
voting power represented by Crosstex Energy GP, LLCs then
outstanding voting securities.
If a change in control were to have occurred as of
December 31, 2009, unit options, restricted units and
performance units held by the named executive officers would
have automatically vested and become payable or exercisable, as
follows:
|
|
|
|
|
Barry E. Davis held 104,167 restricted units and 218,120
performance units that would have become fully vested, payable
and/or
exercisable as a result of such change in control;
|
24
|
|
|
|
|
William W. Davis held 91,667 restricted units and 105,318
performance units that would have become fully vested, payable
and/or
exercisable as a result of such change in control;
|
|
|
|
Joe A. Davis held 91,667 restricted units and 91,876 performance
units that would have become fully vested, payable
and/or
exercisable as a result of such change in control;
|
|
|
|
Michael J. Garberding held 34,494 restricted units that would
have become fully vested, payable
and/or
exercisable as a result of such change in control; and
|
|
|
|
Stan Golemon held 48,607 restricted units that would have become
fully vested, payable
and/or
exercisable as a result of such change in control.
|
Role of Executive Officers in Executive Compensation
The Board, upon recommendation of the Committee, determines the
compensation payable to each of the named executive officers.
None of the named executive officers serves as a member of the
Committee. Barry E. Davis, the Chief Executive Officer, reviews
his recommendations regarding the compensation of his leadership
team with the Committee, including specific recommendations for
each element of compensation for the named executive officers.
Barry E. Davis does not make any recommendations regarding his
personal compensation.
Tax and Accounting Considerations
The equity compensation grant policies of the Crosstex entities
have been impacted by the implementation of FASB ACS 718, which
we adopted effective January 1, 2006. Under this accounting
pronouncement, we are required to value unvested unit options
granted prior to our adoption of FASB ACS 718 under the fair
value method and expense those amounts in the income statement
over the stock options remaining vesting period. As a
result, the Crosstex entities currently intend to discontinue
grants of unit option and stock option awards and instead grant
restricted unit and restricted stock awards to the named
executive officers and other employees. The Crosstex entities
have structured the compensation program to comply with Internal
Revenue Code Section 409A. If an executive is entitled to
nonqualified deferred compensation benefits that are subject to
Section 409A, and such benefits do not comply with
Section 409A, then the benefits are taxable in the first
year they are not subject to a substantial risk of forfeiture.
In such case, the service provider is subject to regular federal
income tax, interest and an additional federal income tax of 20%
of the benefit includible in income. None of the named executive
officers or other employees had non-performance based
compensation paid in excess of the $1.0 million tax
deduction limit contained in Internal Revenue Code
Section 162(m).
Summary
Compensation Table
The following table sets forth certain compensation information
for our named executive officers.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Barry E. Davis
|
|
|
2009
|
|
|
|
435,000
|
|
|
|
435,000
|
|
|
|
1,117,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,327
|
(3)
|
|
|
2,033,039
|
|
President and Chief
|
|
|
2008
|
|
|
|
435,000
|
|
|
|
78,000
|
|
|
|
1,154,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
356,580
|
|
|
|
2,023,684
|
|
Executive Officer
|
|
|
2007
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
1,111,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213,210
|
|
|
|
2,124,619
|
|
William W. Davis
|
|
|
2009
|
|
|
|
315,000
|
|
|
|
315,000
|
|
|
|
983,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,120
|
(4)
|
|
|
1,650,707
|
|
Executive Vice
|
|
|
2008
|
|
|
|
315,000
|
|
|
|
147,000
|
|
|
|
557,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220,452
|
|
|
|
1,239,589
|
|
President and Chief
|
|
|
2007
|
|
|
|
290,000
|
|
|
|
226,000
|
|
|
|
534,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,411
|
|
|
|
1,278,102
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe A. Davis
|
|
|
2009
|
|
|
|
285,000
|
|
|
|
385,000
|
(8)
|
|
|
983,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,370
|
(5)
|
|
|
1,685,957
|
|
Executive Vice President and
|
|
|
2008
|
|
|
|
285,000
|
|
|
|
43,000
|
|
|
|
504,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,324
|
|
|
|
1,066,409
|
|
General Counsel
|
|
|
2007
|
|
|
|
265,000
|
|
|
|
226,000
|
|
|
|
366,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,440
|
|
|
|
994,862
|
|
Michael J. Garberding
|
|
|
2009
|
|
|
|
198,000
|
|
|
|
117,000
|
|
|
|
312,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,274
|
(6)
|
|
|
646,236
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stan Golemon
|
|
|
2009
|
|
|
|
220,000
|
|
|
|
132,000
|
|
|
|
447,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,820
|
(7)
|
|
|
817,907
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
(1)
|
|
Bonuses include all payments made under the Annual Cash Bonus
Plan and Key Employee Retention Plan. See discussion on
page 17.
|
|
(2)
|
|
The amounts shown represent the grant date fair value of awards
computed in accordance with FASB ACS 718. See Note 11 to
our audited financial statements included in Item 8 of the
2009 Annual Report for the assumptions made in our valuation of
such awards. Values for awards subject to performance conditions
are computed based upon the probable outcome of the performance
condition as of the grant date of the award. With respect to the
performance units and shares received during 2007 and 2008 (see
discussion on page 18), the table below shows
(i) minimum and maximum possible payouts based upon the
grant date fair value of the underlying securities, and
(ii) the currently expected payouts at the closing prices
as of December 31, 2009 of $8.60 for Crosstex Energy,
L.P.s common units and $6.05 for Crosstex Energy,
Inc.s common shares:
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Payout
|
|
Minimum Payout
|
|
Expected Payout
|
|
|
Grant
|
|
Payout
|
|
(at Grant Date Fair
|
|
(at Grant Date Fair
|
|
(at 12/31/09 Market
|
Name
|
|
Year
|
|
Date
|
|
Value)
|
|
Value)
|
|
Value)
|
|
Barry E. Davis
|
|
|
2007
|
|
|
|
3/1/2010
|
|
|
$
|
2,222,819
|
|
|
$
|
333,412
|
|
|
$
|
75,518
|
|
|
|
|
2008
|
|
|
|
3/1/2011
|
|
|
$
|
11,541,116
|
|
|
$
|
1,154,105
|
|
|
$
|
266,551
|
|
William W. Davis
|
|
|
2007
|
|
|
|
3/1/2010
|
|
|
$
|
1,069,382
|
|
|
$
|
160,352
|
|
|
$
|
36,333
|
|
|
|
|
2008
|
|
|
|
3/1/2011
|
|
|
$
|
5,571,538
|
|
|
$
|
557,138
|
|
|
$
|
128,676
|
|
Joe A. Davis
|
|
|
2007
|
|
|
|
3/1/2010
|
|
|
$
|
732,844
|
|
|
$
|
109,914
|
|
|
$
|
24,905
|
|
|
|
|
2008
|
|
|
|
3/1/2011
|
|
|
$
|
4,259,968
|
|
|
$
|
504,085
|
|
|
$
|
116,422
|
|
|
|
|
(3)
|
|
Amount of all other compensation for Mr. Barry Davis
includes professional organization and social club dues, a
matching 401(k) contribution of $16,500, distributions on
restricted units and performance units of Crosstex Energy, L.P.
in the amount of $19,571 in 2009 and dividends on restricted
stock and performance shares of Crosstex Energy, Inc. in the
amount of $6,975 in 2009.
|
|
(4)
|
|
Amount of all other compensation for Mr. William Davis
includes professional organization and social club dues, a
matching 401(k) contribution of $22,000, distributions on
restricted units and performance units of Crosstex Energy, L.P.
in the amount of $9,424 in 2009 and dividends on restricted
stock and performance shares of Crosstex Energy, Inc. in the
amount of $3,360 in 2009.
|
|
(5)
|
|
Amount of all other compensation for Mr. Joe Davis includes
professional organization and social club dues, a matching
401(k) contribution of $16,500, distributions on restricted
units and performance units of Crosstex Energy, L.P. in the
amount of $9,900 in 2009 and dividends on restricted stock and
performance shares of Crosstex Energy, Inc. in the amount of
$3,634 in 2009.
|
|
(6)
|
|
Amount of all other compensation for Mr. Michael Garberding
includes a matching 401(k) contribution of $16,500,
distributions on restricted units of Crosstex Energy, L.P. in
the amount of $1,332 in 2009 and dividends on restricted stock
of Crosstex Energy, Inc. in the amount of $442 in 2009.
|
|
(7)
|
|
Amount of all other compensation for Mr. Stan Golemon
includes a matching 401(k) contribution of $16,500,
distributions on restricted units of Crosstex Energy, L.P. in
the amount of $1,735 in 2009 and dividends on restricted stock
of Crosstex Energy, Inc. in the amount of $585 in 2009.
|
|
(8)
|
|
In addition to bonuses received under the Annual Cash Bonus Plan
and Key Employee Retention Plan, Mr. Joe A. Davis received
a discretionary bonus in the amount of $100,000.
|
26
Grants of
Plan-Based Awards for Fiscal Year 2009 Table
The following tables provide information concerning each grant
of an award made to a named executive officer for fiscal year
2009, including, but not limited to, awards made under the
Crosstex Energy, Inc. Long-Term Incentive Plans and the Crosstex
Energy GP, LLC Long-Term Incentive Plan.
CROSSTEX
ENERGY, INC. GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
Date Fair
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
Stock
|
|
|
|
|
Number of Shares
|
|
Awards
|
Name
|
|
Grant Date
|
|
(#)(1)
|
|
($)
|
|
Barry E. Davis
|
|
|
12/15/09
|
|
|
|
104,167
|
|
|
|
469,793
|
|
William W. Davis
|
|
|
12/15/09
|
|
|
|
91,667
|
|
|
|
413,418
|
|
Joe A. Davis
|
|
|
12/15/09
|
|
|
|
91,667
|
|
|
|
413,418
|
|
Michael J. Garberding
|
|
|
12/15/09
|
|
|
|
29,167
|
|
|
|
131,543
|
|
Stan Golemon
|
|
|
12/15/09
|
|
|
|
41,667
|
|
|
|
187,918
|
|
|
|
|
(1)
|
|
These grants include the right to receive dividends on
restricted shares if made on unrestricted common shares during
the restricted period unless otherwise forfeited.
|
CROSSTEX
ENERGY GP, LLC GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
Date Fair
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
Unit
|
|
|
|
|
Number of Units
|
|
Awards
|
Name
|
|
Grant Date
|
|
(#)(1)
|
|
($)
|
|
Barry E. Davis
|
|
|
12/15/09
|
|
|
|
104,167
|
|
|
|
647,919
|
|
William W. Davis
|
|
|
12/15/09
|
|
|
|
91,667
|
|
|
|
570,169
|
|
Joe A. Davis
|
|
|
12/15/09
|
|
|
|
91,667
|
|
|
|
570,169
|
|
Michael J. Garberding
|
|
|
12/15/09
|
|
|
|
29,167
|
|
|
|
181,419
|
|
Stan Golemon
|
|
|
12/15/09
|
|
|
|
41,667
|
|
|
|
259,169
|
|
|
|
|
(1)
|
|
These grants include Distribution Equivalent Rights (DERs) that
provide for distributions on restricted units if made on
unrestricted common units during the restriction period unless
otherwise forfeited.
|
27
Outstanding
Equity Awards at Fiscal Year-End Table for Fiscal Year
2009
The following tables provide information concerning all
outstanding equity awards made to a named executive officer as
of December 31, 2009, including, but not limited to, awards
made under the Crosstex Energy, Inc. Long-Term Incentive Plans
and the Crosstex Energy GP, LLC Long-Term Incentive Plan.
CROSSTEX
ENERGY, INC. OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Number
|
|
or Payout
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
of
|
|
Value of
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
Value of
|
|
Shares,
|
|
Shares,
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number
|
|
Shares or
|
|
Units or
|
|
Units or
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of Shares or
|
|
Units of
|
|
Other
|
|
Other
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Stock
|
|
Rights
|
|
Rights
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
That
|
|
That
|
|
That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)(2)
|
|
(#)(3)
|
|
($)(2)
|
|
Barry E. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,167
|
(1)
|
|
|
630,210
|
|
|
|
5,625
|
(4)
|
|
|
34,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,624
|
(5)
|
|
|
106,625
|
|
William W. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,667
|
(1)
|
|
|
554,585
|
|
|
|
2,692
|
(4)
|
|
|
16,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,508
|
(5)
|
|
|
51,473
|
|
Joe A. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,667
|
(1)
|
|
|
554,585
|
|
|
|
1,845
|
(4)
|
|
|
11,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,698
|
(5)
|
|
|
46,573
|
|
Michael J. Garberding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,167
|
(1)
|
|
|
176,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,912
|
(6)
|
|
|
29,718
|
|
|
|
|
|
|
|
|
|
Stan Golemon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,667
|
(1)
|
|
|
252,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,500
|
(6)
|
|
|
39,325
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Restricted units vest in three equal installments on
January 1, 2011, 2012 and 2013.
|
|
(2)
|
|
The closing price for the common stock was $6.05 as of
December 31, 2009.
|
|
(3)
|
|
Performance shares reported at the threshold (minimum) number of
shares. See discussion on page 18.
|
|
(4)
|
|
Performance shares vest on March 1, 2010.
|
|
(5)
|
|
Performance shares vest on March 1, 2011.
|
|
(6)
|
|
Restricted shares vest on April 1, 2011.
|
28
CROSSTEX
ENERGY GP, LLC OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Number
|
|
or Payout
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
of
|
|
Value of
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
Unearned
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
Shares,
|
|
Shares,
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market
|
|
Units or
|
|
Units or
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number
|
|
Value of
|
|
Other
|
|
Other
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
of Units
|
|
Units
|
|
Rights
|
|
Rights
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
That
|
|
That
|
|
That
|
|
That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)(2)
|
|
(#)(3)
|
|
($)(2)
|
|
Barry E. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,167
|
(1)
|
|
|
895,836
|
|
|
|
4,824
|
(4)
|
|
|
41,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,596
|
(5)
|
|
|
159,926
|
|
William W. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,667
|
(1)
|
|
|
788,336
|
|
|
|
2,331
|
(4)
|
|
|
20,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,977
|
(5)
|
|
|
77,202
|
|
Joe A. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,667
|
(1)
|
|
|
788,336
|
|
|
|
1,598
|
(4)
|
|
|
13,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,122
|
(5)
|
|
|
69,849
|
|
Michael J. Garberding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,167
|
(1)
|
|
|
250,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,327
|
(6)
|
|
|
45,812
|
|
|
|
|
|
|
|
|
|
Stan Golemon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,667
|
(1)
|
|
|
358,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,940
|
(6)
|
|
|
59,684
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Restricted units vest in three equal installments on
January 1, 2011, 2012 and 2013.
|
|
(2)
|
|
The closing price for the common units was $8.60 as of
December 31, 2009.
|
|
(3)
|
|
Performance units reported at the threshold (minimum) number of
units. See discussion on page 20.
|
|
(4)
|
|
Performance units vest on March 1, 2010.
|
|
(5)
|
|
Performance units vest on March 1, 2011.
|
|
(6)
|
|
Restricted units vest on April 1, 2011.
|
Option
Exercises and Units and Shares Vested Table for Fiscal Year
2009
The following table provides information related to the exercise
of options and vesting of restricted units and restricted shares
during fiscal year ended 2009.
OPTION
EXERCISES AND UNITS AND SHARES VESTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crosstex Energy, L.P.
|
|
Crosstex Energy, Inc.
|
|
|
Unit Awards
|
|
Share Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Units
|
|
|
|
Shares
|
|
|
|
|
Acquired on
|
|
Value Realized
|
|
Acquired on
|
|
Value Realized
|
|
|
Vesting
|
|
on Vesting
|
|
Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Barry E. Davis
|
|
|
16,667
|
|
|
|
72,835
|
|
|
|
38,154
|
|
|
|
135,901
|
|
William W. Davis
|
|
|
10,145
|
|
|
|
44,334
|
|
|
|
36,594
|
|
|
|
123,367
|
|
Joe A. Davis
|
|
|
7,199
|
|
|
|
22,389
|
|
|
|
8,565
|
|
|
|
35,716
|
|
Michael J. Garberding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stan Golemon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Compensation
of Directors for Fiscal Year 2009
DIRECTOR
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
or Paid in
|
|
|
|
All Other
|
|
|
|
|
Cash
|
|
Unit Awards(1)
|
|
Compensation(2)
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
James C. Crain(3)
|
|
|
89,000
|
|
|
|
75,002
|
|
|
|
330
|
|
|
|
164,332
|
|
Leldon E. Echols
|
|
|
31,625
|
|
|
|
37,501
|
|
|
|
98
|
|
|
|
69,224
|
|
Bryan H. Lawrence
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sheldon B. Lubar
|
|
|
19,375
|
|
|
|
37,501
|
|
|
|
98
|
|
|
|
56,974
|
|
Cecil E. Martin
|
|
|
27,719
|
|
|
|
37,501
|
|
|
|
98
|
|
|
|
65,318
|
|
Robert F. Murchison(3)
|
|
|
89,625
|
|
|
|
75,002
|
|
|
|
371
|
|
|
|
164,998
|
|
|
|
|
(1)
|
|
Messrs. Echols, Lubar, Martin, Crain and Murchison were
granted awards of restricted shares of Crosstex Energy, Inc. on
August 13, 2009 with a fair market value of $3.94 per share
that will vest on May 7, 2010 in the following amounts,
respectively: 9,518; 9,518; 9,518; 19,036; and 19,036. The
amounts shown represent the grant date fair value of awards
computed in accordance with FASB ACS 718. See Note 11 to
our audited financial statements included in Item 8 of the
2009 Annual Report for the assumptions made in our valuation of
such awards. At December 31, 2009, Messrs. Echols,
Lubar, Martin, Crain and Murchison held aggregate outstanding
restricted share awards, in the following amounts, respectively:
9,518; 9,518; 9,518; 19,036; and 19,036. Mr. Lawrence held
no outstanding restricted share awards at December 31, 2009.
|
|
(2)
|
|
Other compensation is comprised of dividends on restricted
shares.
|
|
(3)
|
|
Messrs. Crain and Murchison serve only on our Board, and
unlike the other Board members listed, none of their
compensation is allocated to Crosstex Energy, L.P.
|
Each non-employee director (other than Mr. Lawrence) is
paid an annual retainer fee of $50,000. Directors do not receive
an attendance fee for each regularly scheduled quarterly board
meeting, but are paid $1,500 for each additional meeting that
they attend. Also, an attendance fee of $1,500 is paid to each
director for each committee meeting that is attended, other than
the Audit Committee, which pays a fee of $3,000 per meeting. The
respective Chairs of each committee receive the following annual
fees: Audit $7,500, Compensation $7,500,
and Governance $5,000. Directors are also reimbursed
for related
out-of-pocket
expenses. Barry E. Davis, as an executive officer of the
Company, is otherwise compensated for his services and therefore
receives no separate compensation for his service as a director.
For directors that serve on both the boards of Crosstex Energy
GP, LLC and Crosstex Energy, Inc., the above listed fees are
generally allocated 75% to Crosstex Energy, L.P. and 25% to us,
except in the case for service on the Audit Committee, where the
Chair is paid a separate fee for each entity and meeting fees
are split 50% to each entity. The Governance Committee annually
reviews and makes recommendations to our Board regarding the
compensation of the directors. Mr. Lawrence received no
compensation in 2009.
Compensation
Polices and Practices As They Relate to the Companys Risk
Management
The Company believes that its compensation policies and
practices for all employees, including executive officers, do
not create risks that are reasonably likely to have a material
adverse effect on the Company.
Compensation
Committee Interlocks and Insider Participation
During the fiscal year ended 2009, the Compensation Committee
was composed of Cecil E. Martin (Chairman) and Robert F.
Murchison. No member of the Compensation Committee was an
officer or employee of the Company during the last fiscal year,
was formerly an officer or employee of the Company or had any
relationship otherwise requiring disclosure hereunder. None of
our executive officers served on the board of directors or the
compensation committee of any other entity for which any
officers of such other entity served either on our Board or
Compensation Committee.
30
Equity
Compensation Plans
The following table provides information regarding our equity
compensation plans as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Remaining Available for
|
|
|
Number of Securities to be
|
|
|
|
Future Issuance Under
|
|
|
Issued Upon Exercise of
|
|
Weighted-Average Price of
|
|
Equity Compensation Plan
|
|
|
Outstanding Options,
|
|
Outstanding Options,
|
|
(Excluding Securities
|
Plan Category
|
|
Warrants, and Rights
|
|
Warrants and Rights
|
|
Reflected in Column(a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity Compensation Plans Approved By Security Holders(1)
|
|
|
1,562,127
|
(2)
|
|
$
|
9.54
|
(3)
|
|
|
2,230,800
|
|
Equity Compensation Plans Not Approved By Security Holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
(1)
|
|
Our Amended and Restated Long-Term Incentive Plan was approved
by our stockholders in October 2006. Our 2009 Long-Term
Incentive Plan was approved by our stockholders in May 2009. See
Item 11, Executive Compensation
Compensation Discussion and Analysis of the 2009 Annual
Report. The plans, as amended, provide for issuance of a total
of 7,190,000 common share options and restricted shares.
|
|
(2)
|
|
The number of securities includes (i) 1,347,981 restricted
shares that have been granted under our long-term incentive plan
that have not vested, and (ii) 146,646 performance units
which could result in grants of restricted units in the future.
|
|
(3)
|
|
The exercise prices for outstanding options under the plan as of
December 31, 2009 range from $6.50 to $13.33 per shares.
|
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and certain officers and any 10%
beneficial owners of us to send reports of their beneficial
ownership of Common Stock and changes in beneficial ownership to
the SEC. Based on our records, except as set forth below, we
believe that during fiscal 2008 all of such reporting persons
complied with all Section 16(a) filing requirements
applicable to them. Due to administrative errors, Form 4s
were filed late on behalf of Susan J. McAden on January 29,
2010, July 14, 2009 and February 3, 2009 and Chieftain
Capital Management, Inc. on December 17, 2009. Due to
administrative error, Form 3s were filed late on behalf of
Michael J. Garberding and Stan Golemon on December 29,
2009. The appropriate filings were made by us on behalf of these
persons promptly following discovery of the errors.
31
PROPOSAL TWO:
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee of our Board has selected KPMG LLP
(KPMG) to continue as our independent registered
public accounting firm for the fiscal year ending
December 31, 2010, subject to ratification by our
stockholders. If our stockholders do not ratify the appointment,
the Audit Committee will consider whether it should select a
different firm, however, it is not required to do so. On the
other hand, even if the appointment is ratified, the Audit
Committee, in its discretion, may select a different independent
registered public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of Crosstex Energy, Inc. and our stockholders. A representative
of KPMG will be present at the annual meeting of stockholders
and will have the opportunity to make a statement if he or she
so desires to do so and is expected to be available to respond
to appropriate questions.
Our Board unanimously recommends
that stockholders vote FOR the ratification of the
appointment of KPMG as our independent public accounting firm
for the fiscal year ended December 31, 2010.
FEES PAID
TO INDEPENDENT PUBLIC ACCOUNTING FIRM
Audit
Fees
The fees for professional services rendered for the audit of our
annual financial statements for each of the fiscal years ended
December 31, 2009 and December 31, 2008, review of our
internal control procedures for the fiscal year ended
December 31, 2009 and December 31, 2008, and the
reviews of the financial statements included in our Quarterly
Reports on
Forms 10-Q
or services that are normally provided by KPMG in connection
with statutory or regulatory filings or engagements for each of
those fiscal years were $243,000. The fees for professional
services rendered for the audit of Crosstex Energy, L.P.s
annual financial statements for each of the fiscal years ended
December 31, 2009 and December 31, 2008, review of our
internal control procedures for the fiscal year ended
December 31, 2009 and December 31, 2008, and the
reviews of the financial statements included in Crosstex Energy,
L.P.s Quarterly Reports on
Forms 10-Q
or services that are normally provided by KPMG in connection
with statutory or regulatory filings or engagements for each of
those fiscal years were $1.2 million. These amounts also
included fees associated with comfort letters and consents
related to debt and equity offerings of Crosstex Energy, L.P.
Audit-Related
Fees
KPMG did not perform any assurance and services related to the
performance of the audit or review of our financial statements
for the fiscal years ended December 31, 2009 and
December 31, 2008 that were not included in the audit fees
listed above.
Tax
Fees
We did not incur any fees by KPMG for tax compliance, tax advice
and tax planning for the years ended December 31, 2009 and
December 31, 2008.
All Other
Fees
KPMG did not render services to us, other than those services
covered in the section captioned Audit Fees for the
fiscal years ended December 31, 2009 and December 31,
2008.
Audit
Committee Approval of Audit and Non-Audit Services
All audit and non-audit services and any services that exceed
the annual limits set forth in our annual engagement letter for
audit services must be pre-approved by the Audit Committee. In
2010, the Audit Committee has not pre-approved the use of KPMG
for any non-audit related services. The Chairman of the Audit
Committee is authorized by the Audit Committee to pre-approve
additional KPMG audit and non-audit services between Audit
Committee meetings; provided that the additional services do not
affect KPMGs independence under applicable Securities and
Exchange Commission rules and any such pre-approval is reported
to the Audit Committee at its next meeting.
32
REPORT OF
THE AUDIT COMMITTEE
The following statement is furnished by the Audit Committee
of Crosstex Energy, Inc. and is not incorporated by reference
into any document that we file with the SEC.
Audit Committee Charter.
Our Audit Committee
acts pursuant to the Audit Committee Charter (the
Charter) adopted by the Board in February 2007. The
Audit Committee consists solely of independent members of the
Board. The primary responsibility of the Audit Committee is to
oversee the Companys financial reporting process on behalf
of the Board, including the evaluation, retention, and, if
necessary, termination of the Companys independent
accountants, the system of internal control and the audit
process. In performing its role, the Audit Committee maintains
effective working relationships with the Board, management, the
internal auditors and the independent accountants. The Audit
Committee has discussed with senior management and the
independent accountants the reporting and internal controls that
have been undertaken by the Company in connection with
certification by the Companys Chief Executive Officer and
Chief Financial Officer pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002 in certain of the Companys
filings with the Securities and Exchange Commission and such
other matters as it deemed appropriate. As set forth in the
Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Companys financial
statements and disclosures are complete and accurate and in
accordance with generally accepted accounting principles and
applicable rules and regulations of the Securities and Exchange
Commission and the NASDAQ Stock Market. The independent
accountants are responsible for auditing the Companys
financial statements and expressing an opinion as to their
conformity with generally accepted accounting principles.
Auditor Independence.
In the performance of
its oversight function, the Audit Committee has reviewed and
discussed the quarterly and audited financial statements,
including the quality of accounting principles, with management
and the independent accountants. The Audit Committee has also
discussed with the independent accountants the matters required
to be discussed by Statement on Auditing Standards No. 114,
The Auditors Communication With Those Charged With
Governance, as currently in effect. Finally, the Audit Committee
(i) reviewed and discussed the Companys audited
consolidated financial statements for the year ended
December 31, 2009 with the Companys management and
with the Companys independent auditors;
(ii) discussed with the Companys independent auditors
the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended; and (iii) received the
written disclosures and the letter from the Companys
independent accountants required by applicable requirements of
the Public Company Accounting Oversight Board regarding the
independent accountants communications with the Audit
Committee concerning independence and discussed with the
Companys independent auditors the independent
auditors independence.
Members of the Audit Committee rely, without independent
verification, on the information provided to them and on the
representations made by management and the independent
accountants. Accordingly, the Audit Committees oversight
does not provide an independent basis to determine that
management has maintained appropriate accounting and financial
reporting principles or appropriate internal controls and
procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the
Audit Committees considerations and discussions referred
to above do not assure that the audits of the Companys
financial statements have been carried out in accordance with
generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted
accounting principles or that the Companys independent
accountants are in fact independent.
Audit Committee Recommendation.
Based upon the
reports and discussions described in this report, and subject to
the limitations on the role and responsibilities of the Audit
Committee referred to above and in the Audit Committee Charter,
the Audit Committee recommended to the Board that the audited
financial statements be included in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2009.
Submitted by the Audit Committee of the Board:
Leldon E. Echols (chair)
James C. Crain
Cecil E. Martin Jr.
33
PROPOSAL THREE:
SEXUAL ORIENTATION NON-DISCRIMINATION POLICY
The Office of the Comptroller of New York City, 1 Centre Street,
New York, NY
10007-2341,
as the trustee
and/or
custodian of the New York City Employees Retirement
System, the New York City Teachers Retirement System, the
New York City Police Pension Fund, the New York City Fire
Department Pension Fund, and the New York City Board of
Education Retirement System has notified the Company of its
intention to introduce the following proposal for consideration
and action by the stockholders at the Annual Meeting. The Office
of the Comptroller of New York City has provided the following
recitals, resolutions and accompanying statements. The Company
has not undertaken any review of the veracity or relevance of
the statements or recitals, and is not responsible for any
inaccuracies contained therein.
Our Board recommends a vote
AGAINST this proposal for the reasons set forth
below.
Whereas:
Crosstex Energy, Inc.
does not
explicitly prohibit discrimination based on sexual orientation
and gender identity in its written employment policy;
Over 88% of the Fortune 500 companies have adopted written
nondiscrimination policies prohibiting harassment and
discrimination on the basis of sexual orientation, as have more
than 98% of Fortune 100 companies, according to the Human
Rights Campaign; over 30% now prohibit discrimination based on
gender identity;
We believe that corporations that prohibit discrimination on the
basis of sexual orientation and gender identity have a
competitive advantage in recruiting and retaining employees from
the widest talent pool;
According to a June, 2008 survey by Harris Interactive and
Witeck-Combs, 65% of gay and lesbian workers in the United
States reported facing some form of job discrimination related
to sexual orientation; an earlier survey found that almost one
out of every 10 gay or lesbian adults also reported that they
had been fired or dismissed unfairly from a previous job, or
pressured to quit a job because of their sexual orientation;
Twenty states, the District of Columbia and more than
160 cities and counties, have laws prohibiting employment
discrimination based on sexual orientation; 12 states and
the District of Columbia have laws prohibiting employment
discrimination based on sexual orientation and gender identity;
Minneapolis, San Francisco, Seattle and Los Angeles have
adopted legislation restricting business with companies that do
not guarantee equal treatment for gay and lesbian employees;
Our company has operations in, and makes sales to institutions
in states and cities that prohibit discrimination on the basis
of sexual orientation;
National public opinion polls consistently find more than three
quarters of the American people support equal rights in the
workplace for gay men, lesbians and bisexuals; for example, in a
Gallup poll conducted in May, 2007, 89% of respondents favored
equal opportunity in employment for gays and lesbians;
Resolved:
The Shareholders request that
Crosstex Energy, Inc.
amend its written equal employment
opportunity policy to explicitly prohibit discrimination based
on sexual orientation and gender identity or expression and to
substantially implement the policy.
Supporting Statement:
Employment
discrimination on the basis of sexual orientation and gender
identity diminishes employee morale and productivity. Because
state and local laws are inconsistent with respect to employment
discrimination, our company would benefit from a consistent,
corporate wide policy to enhance efforts to prevent
discrimination, resolve complaints internally, and ensure a
respectful and supportive atmosphere for all employees.
Crosstex Energy, Inc.
will enhance its competitive edge
by joining the growing ranks of companies guaranteeing equal
opportunity for all employees.
34
Board of
Directors Statement in Opposition to
Proposal No. 3:
The Board is firmly committed to a policy of equal opportunity
for all employees and to a work environment that values
diversity. The Company does not have any employees; therefore it
has not been necessary for it to specifically adopt employment
policies. However, the Partnership has adopted an Equal
Employment Opportunity Policy that explicitly prohibits
discrimination based upon race, color, retaliation, gender,
national origin, age, mental or physical disability, sexual
orientation, veteran status or any other characteristic
protected by law. Due to the wide reach of this policy, we
believe that the current policy of the Partnership ensures that
all employees are treated fairly and with respect.
The Company is fully dedicated to being affiliated with
companies that promote a diverse workforce and that work hard to
build and retain an inclusive and respectful work environment.
Further, because we do not have employees, we believe that it is
unnecessary for us to adopt employment policies that list all
categories along which discrimination is to be prohibited. The
Board believes that the Partnerships employment policies
already appropriately address the concerns set forth in the
proposal and believes that adopting a policy would not benefit
the Company, its stockholders or the employees of the
Partnership.
For the above reasons, the Board recommends that the
stockholders vote AGAINST this proposal.
35
STOCKHOLDER
PROPOSALS AND OTHER MATTERS
Stockholder
Proposals
Any proposal by a stockholder intended to be presented at the
2010 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 November 26, 2010 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
years 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.
Householding
of Proxy Materials
We have adopted a procedure approved by the SEC called
householding. Under this procedure, stockholders who
have the same address and have consented to our mailing of proxy
materials and other stockholder information only to one account
in such household will receive only one copy of the notice
regarding Internet availability of the proxy materials or one
paper copy of the proxy materials, as applicable, unless one or
more of these stockholders notifies us that they wish to
continue receiving individual copies. This procedure helps
reduce our printing costs and postage fees.
Stockholders who participate in householding will continue to
receive separate proxy or voting instruction cards. Also,
householding will not in any way affect dividend check mailings.
If you are eligible for householding, but you and other
stockholders of record with whom you share an address currently
receive multiple copies of the notice regarding Internet
availability of the proxy materials or the proxy materials, as
applicable, or if you hold stock in more than one account, and
in either case you wish to receive only a single copy of each of
these documents for your household, please contact Kathy Sitz at
214-721-9370
or send your request to Crosstex Energy, Inc., Attn: Kathy Sitz,
2501 Cedar Springs, Dallas, Texas 75201. You may also contact us
at this phone number or address if you participate in
householding and wish to receive a separate copy of these
documents.
Stockholders who hold their shares through a brokerage may elect
to participate in householding or revoke their consent to
participate in householding by contacting their respective
brokers.
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.
36
Additional
Information about the Company
You can learn more about us and our operations by visiting our
website at www.crosstexenergy.com. For additional information
about us, please refer to our 2009 Annual Report. Stockholders
receiving a notice about the Internet availability of the proxy
materials will find instructions about how to obtain a paper
copy of the proxy materials on their notice. All stockholders
who do not receive the notice will receive a paper copy of the
proxy materials by mail.
CROSSTEX ENERGY, INC.
Barry E. Davis
President and
Chief Executive Officer
37
ANNUAL MEETING OF
STOCKHOLDERS OF
CROSSTEX ENERGY, INC.
May 7, 2010
NOTICE OF INTERNET
AVAILABILITY OF PROXY MATERIAL
:
The Notice of Meeting, proxy statement and proxy card
are
available at http://phx.corporate-ir.net/phoenix.zhtml?c=148525&p=proxy
Please
complete, sign, date
and mail your proxy card in
the postage-paid envelope
provided as soon as possible.
¯
Please detach along perforated line and mail in the envelope provided.
¯
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20303003000000000000 6
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050710
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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.
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1. Election of Directors:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES LISTED BELOW.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
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NOMINEES:
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FOR
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AGAINST
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ABSTAIN
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o
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FOR ALL NOMINEES
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o
o
o
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Bryan H. Lawrence
Cecil E. Martin Jr.
James C. Crain
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2.
Proposal to ratify the appointment of KPMG LLP as Crosstex Energy,
Inc.s independent public accounting firm for the fiscal year ended December 31, 2010.
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o
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o
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o
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o
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 3.
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FOR
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AGAINST
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ABSTAIN
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FOR ALL EXCEPT
(See instructions below)
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3. Proposal to amend Crosstex Energy, Inc.s employment policy
to explicitly prohibit discrimination based on sexual orientation and gender identity or expression.
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o
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o
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o
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INSTRUCTIONS
:
To withhold authority to vote for
any individual nominee, mark
FOR ALL EXCEPT
and fill in
the circle next to the nominee you wish to withhold, as
shown here:
=
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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.
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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.
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o
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Signature of
Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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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
partnerships name by authorized person.
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PROXY
CROSSTEX ENERGY, INC.
2501 CEDAR SPRINGS RD.
DALLAS, TEXAS 75201
Proxy Solicited on Behalf of the Board of Directors
The undersigned, revoking any proxy heretofore given for the meeting of the stockholders
described on the reverse side of this card, 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
annual meeting of stockholders of Crosstex Energy, Inc. to be held on May 7, 2010, 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 ITEMS 1 AND 2 AND AGAINST APPROVAL OF ITEM 3. The undersigned hereby acknowledges
receipt of notice of, and the proxy statement for, the aforesaid annual meeting of stockholders.
(Continued and to be signed and dated on the reverse side.)
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