exv10w3








    Exhibit 10.3



 




    CROSSTEX
    ENERGY, INC.

    2009 LONG-TERM INCENTIVE PLAN

    (Effective as of March 17, 2009)



 




    ARTICLE I. ESTABLISHMENT
    AND PURPOSE



 



    1.1  Establishment.  The Crosstex
    Energy, Inc. 2009 Long-Term Incentive Plan (the
    “Plan”) is hereby established by the Board of
    Directors of Crosstex Energy, Inc., a Delaware corporation, to
    be effective as of March 17, 2009, subject to stockholder
    approval as provided in Section 1.3.



 



    1.2  Purpose.  The purposes of the
    Plan are to attract able persons to enter the employ of the
    Company, to encourage Employees to remain in the employ of the
    Company and to provide motivation to Employees to put forth
    maximum efforts toward the continued growth, profitability and
    success of the Company, by providing incentives to such persons
    through the ownership
    and/or
    performance of the Common Stock of Crosstex. A further purpose
    of the Plan is to provide a means through which the Company may
    attract able persons to become directors of the Company and to
    provide such individuals with incentive and reward
    opportunities. Toward these objectives, Awards may be granted
    under the Plan to Employees and Outside Directors on the terms
    and subject to the conditions set forth in the Plan.



 



    1.3  Effectiveness.  This Plan shall
    become effective as of March 17, 2009, following its
    adoption by the Board, provided it is duly approved by the
    holders of at least a majority of the shares of Common Stock
    present or represented and entitled to vote at a meeting of the
    stockholders of Crosstex duly held in accordance with applicable
    law within twelve months after the date of adoption of the Plan
    by the Board. If the Plan is not so approved, the Plan shall not
    be effective and any Award granted under the Plan shall be null
    and void.



 




    ARTICLE II. DEFINITIONS



 



    2.1  Affiliate.  “Affiliate”
    means, with respect to any Person, any other Person that
    directly or indirectly through one or more intermediaries
    controls, is controlled by or is under common control with, the
    Person in question. As used herein, the term “control”
    means the possession, direct or indirect, of the power to direct
    or cause the direction of the management and policies of a
    Person, whether through ownership of voting securities, by
    contract or otherwise. With respect to an Incentive Stock
    Option, “Affiliate” means a “parent
    corporation” or a “subsidiary corporation” of
    Crosstex, as those terms are defined in Section 424(e) and
    (f) of the Code.



 



    2.2  Award.  “Award” means
    an award granted to a Participant in the form of an Option, Cash
    Award or Stock Award. All Awards shall be granted by, confirmed
    by, and subject to the terms of, an Award Agreement.



 



    2.3  Award Agreement.  “Award
    Agreement” means a written agreement between Crosstex and a
    Participant that sets forth the terms, conditions, restrictions
    and/or
    limitations applicable to an Award.



 



    2.4  Board.  “Board” means
    the Board of Directors of Crosstex.



 



    2.5  Cash Award.  “Cash
    Award” means an award denominated and payable in cash.



 



    2.6  Cause.  “Cause” means
    (i) Participant has failed to perform the duties assigned
    to him and such failure has continued for thirty (30) days
    following delivery by the Company of written notice to
    Participant of such failure, (ii) Participant has been
    convicted of a felony or misdemeanor involving moral turpitude,
    (iii) Participant has engaged in acts or omissions against
    the Company constituting dishonesty, breach of fiduciary
    obligation, or intentional wrongdoing or misfeasance or
    (iv) Participant has acted intentionally or in bad faith in
    a manner that results in a material detriment to the assets,
    business or prospects of the Company.



 



    2.7  Change of Control.  “Change
    of Control” shall have the meaning set forth in
    Section 12.1.



 



    2.8  Code.  “Code” means
    the Internal Revenue Code of 1986, as amended from time to time,
    including regulations thereunder and successor provisions and
    regulations thereto.




    

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    2.9  Committee.  “Committee”
    means (i) with respect to the application of this Plan to
    Employees, the Compensation Committee of the Board or such other
    committee of the Board as may be designated by the Board to
    administer the Plan, which committee shall consist of two or
    more non-employee directors, each of whom is both a
    “non-employee director” under
    Rule 16b-3
    of the Exchange Act and an “outside director” under
    Section 162(m) of the Code, and (ii) with respect to
    the application of this Plan to an Outside Director, the Board.
    To the extent that no Committee exists that has the authority to
    administer the Plan, the functions of the Committee shall be
    exercised by the Board. If for any reason the appointed
    Committee does not meet the requirements of
    Rule 16b-3
    or Section 162(m) of the Code, such noncompliance with such
    requirements shall not affect the validity of Awards, grants,
    interpretations or other actions of the Committee.



 



    2.10  Common Stock.  “Common
    Stock” means the common stock, $.01 par value per
    share, of Crosstex, or any stock or other securities of Crosstex
    hereafter issued or issuable in substitution or exchange for the
    Common Stock.



 



    2.11  Company.  “Company”
    means Crosstex and its Affiliates.



 



    2.12  Consultant.  “Consultant”
    means an individual performing services for Crosstex or an
    Affiliate who is treated for tax purposes as an independent
    contractor at the time of performance of the services.



 



    2.13  Crosstex.  “Crosstex”
    means Crosstex Energy, Inc., a Delaware corporation, or any
    successor thereto.



 



    2.14  Effective
    Date.  “Effective Date” means the date
    this amended and restated Plan becomes effective as provided in
    Section 1.3.



 



    2.15  Employee.  “Employee”
    means an employee of the Company; provided, however, that the
    term Employee does not include an Outside Director or a
    Consultant.



 



    2.16  Exchange Act.  “Exchange
    Act” means the Securities Exchange Act of 1934, as amended.



 



    2.17  Executive
    Officer.  “Executive Officer” means a
    “covered employee” within the meaning of
    Section 162(m)(3) or any other executive officer designated
    by the Committee for purposes of exempting compensation payable
    under this Plan from the deduction limitations of
    Section 162(m).



 



    2.18  Fair Market Value.  “Fair
    Market Value” means the closing sales price of a share of
    Common Stock on the applicable date (or if there is no trading
    in the Common Stock on such date, on the next preceding date on
    which there was trading) as reported in The Wall Street Journal
    (or other reporting service approved by the Committee). In the
    event the Common Stock is not publicly traded at the time a
    determination of fair market value is required to be made
    hereunder, the determination of fair market value shall be made
    in good faith by the Committee.



 



    2.19  Grant Date.  “Grant
    Date” means the date an Award is granted by the Committee.



 



    2.20  Incentive Stock
    Option.  “Incentive Stock Option” means
    an Option that is intended to meet the requirements of
    Section 422(b) of the Code.



 



    2.21  Nonqualified Stock
    Option.  “Nonqualified Stock Option”
    means an Option that is not an Incentive Stock Option.



 



    2.22  Option.  “Option”
    means an option to purchase shares of Common Stock granted to a
    Participant pursuant to Article VII. An Option may be
    either an Incentive Stock Option or a Nonqualified Stock Option,
    as determined by the Committee.



 



    2.23  Outside
    Director.  “Outside Director” means a
    “non-employee director” of the Company, as defined in
    Rule 16b-3.



 



    2.24  Participant.  “Participant”
    means an Employee, Consultant or Outside Director to whom an
    Award has been granted under the Plan.



 



    2.25  Performance
    Award.  “Performance Award” means an
    award made pursuant to this Plan to a Participant, which Award
    is subject to the attainment of one or more Performance Goals.




    

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    2.26  Performance
    Goal.  “Performance Goal” means a
    standard established by the Committee, to determine in whole or
    in part whether a Performance Award shall be earned.



 



    2.27  Person.  “Person”
    means an individual or a corporation, limited liability company,
    partnership, joint venture, trust, unincorporated organization,
    association, government agency or political subdivision thereof
    or other entity.



 



    2.28  Plan.  “Plan” means
    this Crosstex Energy, Inc. 2009 Long-Term Incentive Plan, as
    amended from time to time.



 



    2.29  Restricted
    Stock.  “Restricted Stock” means shares
    of Common Stock granted to a Participant pursuant to
    Article VIII, which are subject to such restrictions as may
    be determined by the Committee. Restricted Stock shall
    constitute issued and outstanding shares of Common Stock for all
    corporate purposes.



 



    2.30  Restriction
    Period.  “Restriction Period” means the
    period of time established by the Committee at the time of a
    grant of Restricted Stock during which the Restricted Stock
    shall be fully or partially forfeitable.



 



    2.31  Rule 16b-3.  “Rule 16b-3”
    means
    Rule 16b-3
    promulgated by the SEC under the Exchange Act, or any successor
    rule or regulation thereto as in effect from time to time.



 



    2.32  Stock Award.  “Stock
    Award” means an Award of shares of Common Stock or units
    denominated in Common Stock, including an Award of Restricted
    Stock.



 




    ARTICLE III. PLAN
    ADMINISTRATION



 



    3.1  Plan Administrator.  The Plan
    shall be administered by the Committee. The Committee may
    delegate some or all of its power to the Chief Executive Officer
    or other executive officer of the Company as the Committee deems
    appropriate; provided, that (i) the Committee may not
    delegate its power with regard to the grant of an Award to any
    person who is a “covered employee” within the meaning
    of Section 162(m) of the Code or who, in the
    Committee’s judgment, is likely to be a covered employee at
    any time during the period an Award to such employee would be
    outstanding, and (ii) the Committee may not delegate its
    power with regard to the selection for participation in the Plan
    of an officer or other person subject to Section 16 of the
    Exchange Act or decisions concerning the timing, pricing or
    amount of an Award to such an officer or other person.



 



    3.2  Authority of Administrator.  The
    Committee shall have total and exclusive responsibility to
    control, operate, manage and administer the Plan in accordance
    with its terms. The Committee shall have all the authority that
    may be necessary or helpful to enable it to discharge its
    responsibilities with respect to the Plan. Without limiting the
    generality of the preceding sentence, but subject to the
    limitation that none of the enumerated powers of the Committee
    shall be deemed to include any action that would cause a tax to
    be imposed on a Participant pursuant to Section 409A of the
    Code, the Committee shall have the exclusive right to:
    (i) interpret the Plan and the Award Agreements executed
    hereunder; (ii) determine eligibility for participation in
    the Plan; (iii) decide all questions concerning eligibility
    for, and the amount of, Awards granted under the Plan;
    (iv) construe any ambiguous provision of the Plan or any
    Award Agreement; (v) prescribe the form of the Award
    Agreements embodying Awards granted under the Plan;
    (vi) correct any defect, supply any omission or reconcile
    any inconsistency in the Plan or any Award Agreement;
    (vii) issue administrative guidelines as an aid to
    administering the Plan and make changes in such guidelines as
    the Committee from time to time deems proper; (viii) make
    regulations for carrying out the Plan and make changes in such
    regulations as the Committee from time to time deems proper;
    (ix) determine whether Awards should be granted singly or
    in combination; (x) to the extent permitted under the Plan,
    grant waivers of Plan terms, conditions, restrictions and
    limitations; (xi) accelerate the exercise, vesting or
    payment of an Award when such action or actions would be in the
    best interests of the Company; (xii) grant Awards in
    replacement of Awards previously granted under the Plan or any
    other employee benefit plan of the Company; and (xiii) take
    any and all other actions the Committee deems necessary or
    advisable for the proper operation or administration of the
    Plan. Notwithstanding anything herein to the contrary, except in
    connection with a corporate transaction involving the Company as
    provided in Section 4.2 (including, without limitation, any
    stock dividend, stock split, extraordinary cash dividend,
    recapitalization, reorganization, merger, consolidation,
    split-up, spin-off, combination, or exchange of shares), the
    terms of outstanding awards may not be amended to reduce the
    exercise price of outstanding Options




    

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    or cancel, exchange, substitute, buyout or surrender outstanding
    Options in exchange for cash, other awards or Options with an
    exercise price that is less than the exercise price of the
    original Options without stockholder approval.



 



    3.3  Discretionary Authority.  The
    Committee shall have full discretionary authority in all matters
    related to the discharge of its responsibilities and the
    exercise of its authority under the Plan, including, without
    limitation, its construction of the terms of the Plan and its
    determination of eligibility for participation and Awards under
    the Plan. The decisions of the Committee and its actions with
    respect to the Plan shall be final, conclusive and binding on
    all persons having or claiming to have any right or interest in
    or under the Plan, including Participants and their respective
    estates, beneficiaries and legal representatives.



 



    3.4  Liability; Indemnification.  No
    member of the Committee nor any person to whom authority has
    been delegated, shall be personally liable for any action,
    interpretation or determination made in good faith with respect
    to the Plan or Awards granted hereunder, and each member of the
    Committee (or delegatee of the Committee) shall be fully
    indemnified and protected by Crosstex with respect to any
    liability he or she may incur with respect to any such action,
    interpretation or determination, to the extent permitted by
    applicable law.



 




    ARTICLE IV. SHARES
    SUBJECT TO THE PLAN



 



    4.1  Available Shares.  The maximum
    number of shares of Common Stock that shall be available for
    grant of Awards under the Plan shall not exceed a total of
    2,600,000 shares, subject to adjustment as provided in
    Sections 4.2 and 4.3; provided, however, the maximum number
    of shares of Common Stock for which Options or Stock Awards may
    be granted under the Plan to any one Participant during a
    calendar year is 250,000. All shares of Common Stock that remain
    available for issuance hereunder may be issued as Incentive
    Stock Options. No Participant may be granted Cash Awards
    resulting in the payment of more than $2 million in any
    calendar year. Shares of Common Stock issued pursuant to the
    Plan may be shares of original issuance or treasury shares or a
    combination of the foregoing, as the Committee, in its absolute
    discretion, shall from time to time determine.



 



    4.2  Adjustments for Recapitalizations and
    Reorganizations.



 



    (a) The shares with respect to which Awards may be granted
    under the Plan are shares of Common Stock as presently
    constituted, but if, and whenever, prior to the expiration or
    satisfaction of an Award theretofore granted, Crosstex shall
    effect a subdivision or consolidation of shares of Common Stock
    or the payment of a stock dividend on Common Stock in the form
    of Crosstex Common Stock without receipt of consideration by
    Crosstex, the number of shares of Common Stock with respect to
    which such Award may thereafter be exercised or satisfied, as
    applicable, (i) in the event of an increase in the number
    of outstanding shares, shall be proportionately increased, and
    the exercise price per share shall be proportionately reduced,
    and (ii) in the event of a reduction in the number of
    outstanding shares, shall be proportionately reduced, and the
    exercise price per share shall be proportionately increased.



 



    (b) If Crosstex recapitalizes or otherwise changes its
    capital structure, thereafter upon any exercise or satisfaction,
    as applicable, of an Award theretofore granted the Participant
    shall be entitled to (or entitled to purchase, if applicable)
    under such Award, in lieu of the number of shares of Common
    Stock then covered by such Award, the number and class of shares
    of stock or other securities to which the Participant would have
    been entitled pursuant to the terms of the recapitalization if,
    immediately prior to such recapitalization, the Participant had
    been the holder of record of the number of shares of Common
    Stock then covered by such Award.



 



    (c) In the event of changes in the outstanding Common Stock
    by reason of a reorganization, merger, consolidation,
    combination, separation (including a spin-off or other
    distribution of stock or property), exchange, or other relevant
    change in capitalization occurring after the date of grant of
    any Award and not otherwise provided for by this
    Section 4.2, any outstanding Awards and any Award
    Agreements evidencing such Awards shall be subject to adjustment
    by the Committee in its absolute discretion as to the number,
    price and kind of shares or other consideration subject to, and
    other terms of, such Awards to reflect such changes in the
    outstanding Common Stock.




    

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    (d) In the event of any changes in the outstanding Common
    Stock provided for in this Section 4.2, the aggregate
    number of shares available for grant of Awards under the Plan
    may be equitably adjusted by the Committee, whose determination
    shall be conclusive. Any adjustment provided for in this
    Section 4.2 shall be subject to any required stockholder
    action.



 



    4.3  Adjustments for Awards.  The
    Committee shall have full discretion to determine the manner in
    which shares of Common Stock available for grant of Awards under
    the Plan are counted. Without limiting the discretion of the
    Committee under this Section 4.3, unless otherwise
    determined by the Committee, the following rules shall apply for
    the purpose of determining the number of shares of Common Stock
    available for grant of Awards under the Plan:



 



    (a) Stock-Based Awards.  The grant of
    Options and Stock Awards shall reduce the number of shares
    available for grant of Awards under the Plan by the number of
    shares subject to such Award.



 



    (b) Termination.  If any Award referred to
    in paragraph (a) above is canceled or forfeited, or
    terminates, expires or lapses for any reason, the shares then
    subject to such Award shall again be available for grant of
    Awards under the Plan.



 



    (c) Payment of Exercise Price and Withholding
    Taxes.  If previously acquired shares of Common
    Stock are used to pay the exercise price of an Award, the number
    of shares available for grant of Awards under the Plan shall not
    be increased by the number of shares delivered as payment of
    such exercise price. If previously acquired shares of Common
    Stock are used to pay withholding taxes payable upon exercise,
    vesting or payment of an Award, or shares of Common Stock that
    would be acquired upon exercise, vesting or payment of an Award
    are withheld to pay withholding taxes payable upon exercise,
    vesting or payment of such Award, the number of shares available
    for grant of Awards under the Plan shall not be increased by the
    number of shares delivered or withheld as payment of such
    withholding taxes.



 



    (d) Fractional Shares.  If any such
    adjustment would result in a fractional security being
    (i) available under the Plan, such fractional security
    shall be disregarded or (ii) subject to an Award, Crosstex
    shall pay the holder of such Award, in connection with the first
    vesting, exercise or settlement of such Award in whole or in
    part occurring after such adjustment, an amount in cash
    determined by multiplying (x) the fraction of such security
    (rounded to the nearest hundredth) by (y) the excess, if
    any, of the Fair Market Value on the vesting, exercise or
    settlement date over the exercise price, if any, of such Award.



 




    ARTICLE V. ELIGIBILITY



 



    All Employees, Consultants and Outside Directors are eligible to
    participate in the Plan. The Committee shall recommend, from
    time to time, Participants from those Employees, Consultants and
    Outside Directors who, in the opinion of the Committee, can
    further the Plan purposes. Once a Participant is recommended for
    an Award by the Committee, the Committee shall determine the
    type and size of Award to be granted to the Participant and
    shall establish in the related Award Agreement the terms,
    conditions, restrictions
    and/or
    limitations applicable to the Award, in addition to those set
    forth in the Plan and the administrative rules and regulations,
    if any, established by the Committee.



 




    ARTICLE VI. FORM OF
    AWARDS



 



    Awards may, at the Committee’s sole discretion, be granted
    under the Plan in the form of Options, Stock Awards, Restricted
    Stock, Performance Awards or a combination thereof. All Awards
    shall be subject to the terms, conditions, restrictions and
    limitations of the Plan. The Committee may, in its absolute
    discretion, subject any Award to such other terms, conditions,
    restrictions
    and/or
    limitations (including, but not limited to, the time and
    conditions of exercise, vesting or payment of an Award and
    restrictions on transferability of any shares of Common Stock
    issued or delivered pursuant to an Award), provided they are not
    inconsistent with the terms of the Plan. Awards under a
    particular Article of the Plan need not be uniform, and Awards
    under more than one Article of the Plan may be combined into a
    single Award Agreement. Any combination of Awards may be granted
    at one time and on more than one occasion to the same
    Participant.




    

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    ARTICLE VII. OPTIONS



 



    7.1  General.  Awards may be granted
    to Employees, Consultants and Outside Directors in the form of
    Options. Options granted under the Plan may be Incentive Stock
    Options or Nonqualified Stock Options, or a combination of both;
    provided, however, that Incentive Stock Options may be granted
    only to Employees.



 



    7.2  Terms and Conditions of
    Options.  An Option shall be exercisable in whole
    or in such installments and at such times as may be determined
    by the Committee. The price at which a share of Common Stock may
    be purchased upon exercise of a Nonqualified Stock Option shall
    be determined by the Committee, but such exercise price shall
    not be less than 100% of the Fair Market Value per share of
    Common Stock on the Grant Date. Except as otherwise provided in
    Section 7.3, the term of each Option shall be as specified
    by the Committee; provided, however, that, no Options shall be
    exercisable later than ten years from the Grant Date. Options
    may be granted with respect to Restricted Stock or shares of
    Common Stock that are not Restricted Stock, as determined by the
    Committee in its absolute discretion.



 



    7.3  Restrictions Relating to Incentive Stock
    Options.  Options granted in the form of Incentive
    Stock Options shall, in addition to being subject to the terms
    and conditions of Section 7.2, comply with
    Section 422(b) of the Code. Accordingly, no Incentive Stock
    Options shall be granted later than ten years from the date of
    adoption of the Plan by the Board. To the extent that the
    aggregate Fair Market Value (determined at the time the
    respective Incentive Stock Option is granted) of Common Stock
    with respect to which Incentive Stock Options are exercisable
    for the first time by an individual during any calendar year
    under all incentive stock option plans of Crosstex and its
    Affiliates exceeds $100,000, such excess Incentive Stock Options
    shall be treated as Nonqualified Stock Options. The Committee
    shall determine, in accordance with the applicable provisions of
    the Code, which of a Participant’s Incentive Stock Options
    will not constitute Incentive Stock Options because of such
    limitation and shall notify the Participant of such
    determination as soon as practicable after such determination.
    The price at which a share of Common Stock may be purchased upon
    exercise of an Incentive Stock Option shall be determined by the
    Committee, but such exercise price shall not be less than 100%
    of the Fair Market Value of a share of Common Stock on the Grant
    Date. No Incentive Stock Option shall be granted to an Employee
    under the Plan if, at the time such Option is granted, such
    Employee owns stock possessing more than 10% of the total
    combined voting power of all classes of stock of Crosstex or an
    Affiliate, within the meaning of Section 422(b)(6) of the
    Code, unless (i) on the Grant Date of such Option, the
    exercise price of such Option is at least 110% of the Fair
    Market Value of the Common Stock subject to the Option and
    (ii) such Option by its terms is not exercisable after the
    expiration of five years from the Grant Date of the Option.



 



    7.4  Additional Terms and
    Conditions.  The Committee may subject any Award
    of an Option to such other terms, conditions, restrictions
    and/or
    limitations as it determines are necessary or appropriate,
    provided they are not inconsistent with the Plan.



 



    7.5  Exercise of Options.  Subject to
    the terms and conditions of the Plan, Options shall be exercised
    by the delivery of a written notice of exercise to Crosstex,
    setting forth the number of shares of Common Stock with respect
    to which the Option is to be exercised, accompanied by full
    payment for such shares.



 



    Upon exercise of an Option, the exercise price of the Option
    shall be payable to Crosstex in full either: (i) in cash or
    an equivalent acceptable to the Committee, or (ii) in the
    absolute discretion of the Committee and in accordance with any
    applicable administrative guidelines established by the
    Committee, by tendering one or more previously acquired
    nonforfeitable shares of Common Stock that have been owned by
    the Participant or by reducing the number of shares issuable
    upon exercise of the Option, in either case having an aggregate
    Fair Market Value at the time of exercise equal to the total
    exercise price (including an actual or deemed multiple series of
    exchanges of such shares), or (iii) in a combination of the
    forms of payment specified in clauses (i) and
    (ii) above.



 



    From and after such time as Crosstex registers the Common Stock
    under Section 12 of the Exchange Act, payment of the
    exercise price of an Option may also be made, in the absolute
    discretion of the Committee, by delivery to Crosstex or its
    designated agent of an executed irrevocable option exercise form
    together with irrevocable instructions to a broker-dealer to
    sell or margin a sufficient portion of the shares with respect
    to which the Option is exercised and deliver the sale or margin
    loan proceeds directly to Crosstex to pay the exercise price and
    any required withholding taxes.




    

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    As soon as reasonably practicable after receipt of written
    notification of exercise of an Option and full payment of the
    exercise price and any required withholding taxes, Crosstex
    shall deliver to the Participant, in the Participant’s
    name, a stock certificate or certificates in an appropriate
    amount based upon the number of shares of Common Stock purchased
    under the Option.



 



    7.6  Termination of Employment or
    Service.  Each Award Agreement embodying the Award
    of an Option shall set forth the extent to which the Participant
    shall have the right to exercise the Option following
    termination of the Participant’s employment or service with
    the Company. Such provisions shall be determined by the
    Committee in its absolute discretion, need not be uniform among
    all Options granted under the Plan and may reflect distinctions
    based on the reasons for termination of employment or service.
    In the event a Participant’s Award Agreement embodying the
    award of an Option does not set forth such termination
    provisions, the following termination provisions shall apply
    with respect to such Award:



 



    (a) Death, Disability or Retirement.  If
    the employment or service of a Participant shall terminate by
    reason of death, permanent and total disability (within the
    meaning of Section 22(e)(3) of the Code) or retirement with
    the approval of the Committee on or after the Participant’s
    attainment of age 60, each outstanding Option held by the
    Participant shall become vested and may be exercised until the
    earlier of (i) the expiration of one year (three months in
    the case of an Incentive Stock Option held by a retired
    Participant) from the date of such termination of employment or
    service, or (ii) the expiration of the term of such Option.



 



    (b) Other Termination.  If the employment
    or service of a Participant shall terminate for any reason other
    than a reason set forth in paragraph (a) above or paragraph
    (c) below, whether on a voluntary or involuntary basis,
    each outstanding Option held by the Participant may be
    exercised, to the extent then vested, until the earlier of
    (i) the expiration of three months from the date of such
    termination of employment or service, or (ii) the
    expiration of the term of such Option.



 



    (c) Termination for
    Cause.  Notwithstanding paragraphs (a) and
    (b) above, if the employment or service of a Participant is
    terminated for Cause, all outstanding Options held by the
    Participant shall immediately be forfeited to the Company and no
    additional exercise period shall be allowed, regardless of the
    vested status of the Option.



 




    ARTICLE VIII. RESTRICTED
    STOCK



 



    8.1  General.  Awards may be granted
    to Employees, Consultants and Outside Directors in the form of
    Restricted Stock. Restricted Stock shall be awarded in such
    numbers and at such times as the Committee shall determine.



 



    8.2  Restriction Period.  At the time
    an Award of Restricted Stock is granted, the Committee shall
    establish the Restriction Period applicable to such Restricted
    Stock. Each Award of Restricted Stock may have a different
    Restriction Period, in the discretion of the Committee. The
    Restriction Period applicable to a particular Award of
    Restricted Stock shall not be changed except as permitted by
    Article IV or Section 8.3 of this Article.



 



    8.3  Other Terms and
    Conditions.  Restricted Stock awarded to a
    Participant under the Plan shall be represented by a stock
    certificate registered in the name of the Participant or, at the
    option of Crosstex, in the name of a nominee of Crosstex.
    Subject to the terms and conditions of the Award Agreement, a
    Participant to whom Restricted Stock has been awarded shall have
    the right to receive dividends thereon during the Restriction
    Period, to vote the Restricted Stock and to enjoy all other
    stockholder rights with respect thereto, except that
    (i) the Participant shall not be entitled to possession of
    the stock certificate representing the Restricted Stock until
    the Restriction Period shall have expired, (ii) Crosstex
    shall retain custody of the Restricted Stock during the
    Restriction Period, (iii) the Participant may not sell,
    transfer, pledge, exchange, hypothecate or otherwise dispose of
    the Restricted Stock during the Restriction Period, and
    (iv) a breach of the terms and conditions established by
    the Committee pursuant to the Award of the Restricted Stock
    shall cause a forfeiture of the Restricted Stock. At the time of
    an Award of Restricted Stock, the Committee may, in its absolute
    discretion, prescribe additional terms, conditions, restrictions
    and/or
    limitations applicable to the Restricted Stock, including, but
    not limited to, rules pertaining to the termination of
    employment or service by reason of death, permanent and total
    disability, retirement or otherwise, of a Participant prior to
    expiration of the Restriction Period.




    

    7








 






    8.4  Payment for Restricted Stock.  A
    Participant shall not be required to make any payment for
    Restricted Stock awarded to the Participant, except to the
    extent otherwise required by the Committee or by applicable law.



 



    8.5  Miscellaneous.  Nothing in this
    Article shall prohibit the exchange of shares of Restricted
    Stock issued under the Plan pursuant to a plan of reorganization
    for stock or securities of Crosstex or another corporation that
    is a party to the reorganization, but the stock or securities so
    received for shares of Restricted Stock shall, except as
    provided in Article IV or XI, become subject to the
    restrictions applicable to the Award of such Restricted Stock.
    Any shares of stock received as a result of a stock split or
    stock dividend with respect to shares of Restricted Stock shall
    also become subject to the restrictions applicable to the Award
    of such Restricted Stock.



 




    ARTICLE IX. STOCK
    AWARDS



 



    9.1  General; Terms and
    Conditions.  An Award may be in the form of a
    Stock Award. The terms, conditions and limitations applicable to
    any Stock Awards granted pursuant to this Plan shall be
    determined by the Committee, subject to the specific provisions
    for Restricted Stock set forth in Article VIII.



 




    ARTICLE X. CASH
    AWARDS



 



    10.1  General; Terms and
    Conditions.  An Award may be in the form of a Cash
    Award. The terms, conditions and limitations applicable to any
    Cash Awards granted pursuant to this Plan shall be determined by
    the Committee.



 




    ARTICLE XI. PERFORMANCE
    AWARDS



 



    11.1  General.  Without limiting the
    type or number of Awards that may be made under the other
    provisions of this Plan, an Award may be in the form of a
    Performance Award. The terms, conditions and limitations
    applicable to any Performance Awards granted to Participants
    pursuant to this Plan shall be determined by the Committee,
    subject to the limitations specified below. Any Stock Award
    which is a Performance Award shall have a minimum Restriction
    Period of one year from the date of grant, provided that the
    Committee may provide for earlier vesting following a change of
    control or other specified events involving the Company, or upon
    a termination of employment by reason of death, disability or
    retirement, or termination of service subject to the limitations
    specified below. The Committee shall set Performance Goals in
    its sole discretion which, depending on the extent to which they
    are met, will determine the value
    and/or
    amount of Performance Awards that will be paid out to the
    Participant
    and/or the
    portion of an Award that may be exercised.



 



    11.2  Nonqualified Performance
    Awards.  Performance Awards granted to Employees,
    Consultants or Outside Directors that are not intended to
    qualify as qualified performance-based compensation under
    Section 162(m) shall be based on achievement of such
    Performance Goals and be subject to such terms, conditions and
    restrictions as the Committee or its delegate shall determine.



 



    11.3  Qualified Performance
    Awards.  Performance Awards granted to Executive
    Officers under this Plan that are intended to qualify as
    qualified performance-based compensation under
    Section 162(m) shall be paid, vested or otherwise
    deliverable solely on account of the attainment of one or more
    pre-established, objective Performance Goals established and
    administered by the Committee in accordance with
    Section 162(m) prior to the earlier to occur of
    (x) 90 days after the commencement of the period of
    service to which the Performance Goal relates and (y) the
    lapse of 25% of the period of service (as scheduled in good
    faith at the time the goal is established), and in any event
    while the outcome is substantially uncertain. A Performance Goal
    is objective if a third party having knowledge of the relevant
    facts could determine whether the goal is met.



 



    (a) Such a Performance Goal may be based on one or more
    business criteria that apply to an Executive Officer, one or
    more business units, divisions or sectors of the Company, or the
    Company as a whole, and if so




    

    8








 






    desired by the Committee, by comparison with a peer group of
    companies. A Performance Goal may include one or more of the
    following and need not be the same for each Executive Officer:



 


			
	 	    • 
	
    revenue and income measures (which include revenue, gross
    margin, income from operations, net income, net sales and
    earnings per share);

	 
	 	    • 
	
    expense measures (which include costs of goods sold, selling,
    general and administrative expenses and overhead costs);

	 
	 	    • 
	
    operating measures (which include volumes, margin, operating
    results, other operating measures and productivity);

	 
	 	    • 
	
    cash flow measures (which include net cash flow from operating
    activities and working capital);

	 
	 	    • 
	
    liquidity measures (which include earnings before or after the
    effect of certain items such as interest, taxes, depreciation
    and amortization, and free cash flow);

	 
	 	    • 
	
    leverage measures (which include debt-to-equity ratio and net
    debt);

	 
	 	    • 
	
    market measures (which include market share, stock price, total
    shareholder return and market capitalization measures);

	 
	 	    • 
	
    return measures (which include return on equity, return on
    assets and return on invested capital);

	 
	 	    • 
	
    corporate value measures (which include compliance, safety,
    environmental and personnel matters); and

	 
	 	    • 
	
    other measures such as those relating to acquisitions,
    dispositions or customer satisfaction.




 



    (b) Unless otherwise stated, such a Performance Goal need
    not be based upon an increase or positive result under a
    particular business criterion and could include, for example,
    maintaining the status quo, performance relative to a peer group
    determined by the Committee or limiting economic losses
    (measured, in each case, by reference to specific business
    criteria). In interpreting Plan provisions applicable to
    Performance Goals and qualified Performance Awards, it is the
    intent of this Plan to conform with Section 162(m),
    including, without limitation, Treasury Regulation
    § 1.162-27(e)(2)(i), as to grants to Executive
    Officers and the Committee in establishing such goals and
    interpreting the Plan shall be guided by such provisions. Prior
    to the payment of any compensation based on the achievement of
    Performance Goals applicable to qualified Performance Awards,
    the Committee must certify in writing that applicable
    Performance Goals and any of the material terms thereof were, in
    fact, satisfied. Subject to the foregoing provisions, the terms,
    conditions and limitations applicable to any qualified
    Performance Awards made pursuant to this Plan shall be
    determined by the Committee to the extent permitted by Section
    162(m).



 



    (c) The Committee shall adjust the Performance Goals
    (either up or down) and the level of the Performance Award that
    a Participant may earn under this Plan, to the extent permitted
    pursuant to Section 162(m), if it determines that the
    occurrence of external changes or other unanticipated business
    conditions have materially affected the fairness of the goals
    and have unduly influenced the Company’s ability to meet
    them, including without limitation, events such as material
    acquisitions, changes in the capital structure of the Company,
    and extraordinary accounting changes. In addition, Performance
    Goals and Performance Awards shall be calculated without regard
    to any changes in accounting standards that may be required by
    the Financial Accounting Standards Board after such Performance
    Goals are established. Further, in the event a period of service
    to which a Performance Goal relates is less than twelve months,
    the Committee shall have the right, in its sole discretion, to
    adjust the Performance Goals and the level of Performance Award
    opportunity.



 




    ARTICLE XII. CHANGE
    OF CONTROL



 



    12.1  Definition of Change of
    Control.  A “Change of Control” means:
    (a) the consummation of a merger or consolidation of the
    Company with or into another entity or any other transaction
    (other than a merger, consolidation or other transaction with or
    into Crosstex Energy, L.P., Crosstex Energy GP, LLC or Crosstex
    Energy




    

    9








 






    GP, L.P.), if Persons who were not shareholders of the Company
    immediately prior to such merger, consolidation or other
    transaction beneficially own immediately after such merger,
    consolidation or other transaction 50% or more of the voting
    power of the outstanding securities of each of (i) the
    continuing or surviving entity and (ii) any direct or
    indirect parent entity of such continuing or surviving entity;
    (b) the sale, transfer or other disposition of all or
    substantially all of the Company’s assets; (c) a
    change in the composition of the Board as a result of which
    fewer than 50% of the incumbent directors are directors who
    either (i) had been directors of Crosstex on the date
    12 months prior to the date of the event that may
    constitute a Change of Control (the “original
    directors”) or (ii) were elected, or nominated for
    election, to the Board with the affirmative votes of at least a
    majority of the aggregate of the original directors who were
    still in office at the time of the election or nomination and
    the directors whose election or nomination was previously so
    approved; or (d) any transaction as a result of which any
    Person is the “beneficial owner” (as defined in
    Rule 13d-3
    under the Exchange Act), directly or indirectly, of securities
    of the Company representing at least 50% of the total voting
    power represented by the Company’s then outstanding voting
    securities.



 



    12.2  Effect on Outstanding
    Awards.  Immediately prior to a Change of Control,
    all Awards shall automatically vest and become payable or
    exercisable, as the case may be, in full. In this regard, all
    Restriction Periods shall terminate. The phrase
    “Immediately prior to a Change of Control” shall be
    understood to mean sufficiently in advance of a Change of
    Control to permit Participants to take all steps reasonably
    necessary to exercise an Award, if applicable, and to deal with
    the Common Stock underlying all Awards so that all Awards and
    Common Stock issuable with respect thereto may be treated in the
    same manner as the shares of stock of other stockholders in
    connection with the Change of Control. Notwithstanding the
    foregoing, payment of any Award subject to Section 409A
    shall not be accelerated upon a Change of Control unless such
    Change of Control qualifies as a “change in control
    event” within the meaning of Treas. Reg.
    Section 1.409A-3(i)(5).



 




    ARTICLE XIII. AMENDMENT
    AND TERMINATION



 



    13.1  Plan Amendment and
    Termination.  The Board may at any time suspend,
    terminate, amend or modify the Plan, in whole or in part;
    provided, however, that no amendment or modification of the Plan
    shall become effective without the approval of such amendment or
    modification by the stockholders of Crosstex (i) if such
    amendment or modification increases the maximum number of shares
    subject to the Plan (except as provided in
    Article IV) or changes the designation or class of
    persons eligible to receive Awards under the Plan, or
    (ii) if counsel for Crosstex determines that such approval
    is otherwise required by or necessary to comply with applicable
    law. The Plan shall terminate upon the earlier of (i) the
    termination of the Plan by the Board, or (ii) the
    expiration of ten years from the Effective Date. Upon
    termination of the Plan, the terms and provisions of the Plan
    shall, notwithstanding such termination, continue to apply to
    Awards granted prior to such termination. No suspension,
    termination, amendment or modification of the Plan shall
    adversely affect in any material way any Award previously
    granted under the Plan, without the consent of the Participant
    (or the permitted transferee) holding such Award.



 



    13.2  Award Amendment.  The Board may
    amend the terms of any outstanding Award granted pursuant to
    this Plan, but no such amendment shall adversely affect in any
    material way the Participant’s (or a permitted
    transferee’s) rights under an outstanding Award without the
    consent of the Participant (or the permitted transferee) holding
    such Award; provided, however, that no amendment shall be made
    that would cause the exercise price of an Option to be less than
    the Fair Market Value of the Common Stock subject to the Option
    on the Grant Date.



 




    ARTICLE XIV. MISCELLANEOUS



 



    14.1  Award Agreements.  After the
    Committee grants an Award under the Plan to a Participant,
    Crosstex and the Participant shall enter into an Award Agreement
    setting forth the terms, conditions, restrictions
    and/or
    limitations applicable to the Award and such other matters as
    the Committee may determine to be appropriate. The terms and
    provisions of the respective Award Agreements need not be
    identical. All Award Agreements shall be subject to the
    provisions of the Plan, and in the event of any conflict between
    an Award Agreement and the Plan, the terms of the Plan shall
    govern.




    

    10








 






    14.2  Listing Conditions.



 



    (a) As long as the Common Stock is listed on a national
    securities exchange or system sponsored by a national securities
    association, the issuance of any shares of Common Stock pursuant
    to an Award shall be conditioned upon such shares being listed
    on such exchange or system. Crosstex shall have no obligation to
    issue such shares unless and until such shares are so listed,
    and the right to exercise any Option or other Award with respect
    to such shares shall be suspended until such listing has been
    effected.



 



    (b) If at any time counsel to Crosstex or its Affiliates
    shall be of the opinion that any sale or delivery of shares of
    Common Stock pursuant to an Award is or may in the circumstances
    be unlawful or result in the imposition of excise taxes on
    Crosstex or its Affiliates under the statutes, rules or
    regulations of any applicable jurisdiction, Crosstex or its
    Affiliates shall have no obligation to make such sale or
    delivery, or to make any application or to effect or to maintain
    any qualification or registration under the Securities Act of
    1933, as amended, or otherwise, with respect to shares of Common
    Stock or Awards, and the right to exercise any Option or other
    Award shall be suspended until, in the opinion of said counsel,
    such sale or delivery shall be lawful or will not result in the
    imposition of excise taxes on Crosstex or its Affiliates.



 



    (c) Upon termination of any period of suspension under this
    Section 14.2, any Award affected by such suspension which shall
    not then have expired or terminated shall be reinstated as to
    all shares available before such suspension and as to shares
    which would otherwise have become available during the period of
    such suspension, but no such suspension shall extend the term of
    any Award.



 



    14.3  Additional
    Conditions.  Notwithstanding anything in the Plan
    to the contrary: (i) Crosstex may, if it shall determine it
    necessary or desirable for any reason, at the time of grant of
    any Award or the issuance of any shares of Common Stock pursuant
    to any Award, require the recipient of the Award or such shares
    of Common Stock, as a condition to the receipt thereof, to
    deliver to Crosstex a written representation of present
    intention to acquire the Award or such shares of Common Stock
    for his or her own account for investment and not for
    distribution; (ii) the certificate for shares of Common
    Stock issued to a Participant may include any legend which the
    Committee deems appropriate to reflect any restrictions on
    transfer, and (iii) all certificates for shares of Common
    Stock delivered under the Plan shall be subject to such stop
    transfer orders and other restrictions as the Committee may deem
    advisable under the rules, regulations and other requirements of
    the SEC, any stock exchange upon which the Common Stock is then
    quoted, any applicable federal or state securities law, and any
    applicable corporate law, and the Committee may cause a legend
    or legends to be put on any such certificates to make
    appropriate reference to such restrictions.



 



    14.4  Nonassignability.  No Award
    granted under the Plan may be sold, transferred, pledged,
    exchanged, hypothecated or otherwise disposed of, other than by
    will or pursuant to the applicable laws of descent and
    distribution. Further, no such Award shall be subject to
    execution, attachment or similar process. Any attempted sale,
    transfer, pledge, exchange, hypothecation or other disposition
    of an Award not specifically permitted by the Plan or the Award
    Agreement shall be null and void and without effect. All Awards
    granted to a Participant under the Plan shall be exercisable
    during his or her lifetime only by such Participant or, in the
    event of the Participant’s legal incapacity, by his or her
    guardian or legal representative. Notwithstanding the foregoing,
    to the extent specifically provided by the Committee, an Award,
    including an Option, may be transferred by a Participant without
    consideration to immediate family members or related family
    trusts, limited partnerships or similar entities or on such
    terms and conditions as the Committee may from time to time
    establish.



 



    14.5  Withholding Taxes.  The Company
    shall be entitled to deduct from any payment made under the
    Plan, regardless of the form of such payment, the amount of all
    applicable income and employment taxes required by law to be
    withheld with respect to such payment, may require the
    Participant to pay to the Company such withholding taxes prior
    to and as a condition of the making of any payment or the
    issuance or delivery of any shares of Common Stock under the
    Plan, and shall be entitled to deduct from any other
    compensation payable to the Participant any withholding
    obligations with respect to Awards under the Plan. In accordance
    with any applicable administrative guidelines it establishes,
    the Committee may allow a Participant to pay the amount of taxes
    required by law to be withheld from or with respect to an Award
    by (i) withholding shares of Common Stock from any payment
    of Common Stock due as a result of such Award, or
    (ii) permitting the Participant to deliver to the Company
    previously acquired shares of Common Stock, in each case having
    a Fair Market Value equal to the




    

    11








 






    amount of such required withholding taxes. No payment shall be
    made and no shares of Common Stock shall be issued pursuant to
    any Award unless and until the applicable tax withholding
    obligations have been satisfied.



 



    14.6  No Fractional Shares.  No
    fractional shares of Common Stock shall be issued or delivered
    pursuant to the Plan or any Award granted hereunder, and except
    as otherwise provided herein, no payment or other adjustment
    shall be made in respect of any such fractional share.



 



    14.7  Notices.  All notices required
    or permitted to be given or made under the Plan or any Award
    Agreement shall be in writing and shall be deemed to have been
    duly given or made if (i) delivered personally,
    (ii) transmitted by first class registered or certified
    United States mail, postage prepaid, return receipt requested,
    (iii) sent by prepaid overnight courier service, or
    (iv) sent by telecopy or facsimile transmission, answer
    back requested, to the person who is to receive it at the
    address that such person has theretofore specified by written
    notice delivered in accordance herewith. Such notices shall be
    effective (i) if delivered personally or sent by courier
    service, upon actual receipt by the intended recipient,
    (ii) if mailed, upon the earlier of five days after deposit
    in the mail or the date of delivery as shown by the return
    receipt therefor, or (iii) if sent by telecopy or facsimile
    transmission, when the answer back is received. Crosstex or a
    Participant may change, at any time and from time to time, by
    written notice to the other, the address that it or such
    Participant had theretofore specified for receiving notices.
    Until such address is changed in accordance herewith, notices
    hereunder or under an Award Agreement shall be delivered or sent
    (i) to a Participant at his or her address as set forth in
    the records of the Company or (ii) to Crosstex at the
    principal executive offices of Crosstex clearly marked
    “Attention: LTIP Administrator.”



 



    14.8  Binding Effect.  The
    obligations of Crosstex under the Plan shall be binding upon any
    successor corporation or organization resulting from the merger,
    consolidation or other reorganization of Crosstex, or upon any
    successor corporation or organization succeeding to all or
    substantially all of the assets and business of Crosstex. The
    terms and conditions of the Plan shall be binding upon each
    Participant and his or her heirs, legatees, distributees and
    legal representatives.



 



    14.9  Severability.  If any provision
    of the Plan or any Award Agreement is held to be illegal or
    invalid for any reason, the illegality or invalidity shall not
    affect the remaining provisions of the Plan or such agreement,
    as the case may be, but such provision shall be fully severable
    and the Plan or such agreement, as the case may be, shall be
    construed and enforced as if the illegal or invalid provision
    had never been included herein or therein.



 



    14.10  No Restriction of Corporate
    Action.  Nothing contained in the Plan shall be
    construed to prevent Crosstex or any Affiliate from taking any
    corporate action (including any corporate action to suspend,
    terminate, amend or modify the Plan) that is deemed by Crosstex
    or such Affiliate to be appropriate or in its best interest,
    whether or not such action would have an adverse effect on the
    Plan or any Awards made or to be made under the Plan. No
    Participant or other person shall have any claim against
    Crosstex or any Affiliate as a result of such action.



 



    14.11  Governing Law.  The Plan shall
    be governed by and construed in accordance with the internal
    laws (and not the principles relating to conflicts of laws) of
    the State of Delaware except as superseded by applicable federal
    law.



 



    14.12  No Right, Title or Interest in Company
    Assets.  No Participant shall have any rights as a
    stockholder of Crosstex as a result of participation in the Plan
    until the date of issuance of a stock certificate in his or her
    name and, in the case of Restricted Stock, unless and until such
    rights are granted to the Participant pursuant to the Plan. To
    the extent any person acquires a right to receive payments from
    the Company under the Plan, such rights shall be no greater than
    the rights of an unsecured general creditor of the Company, and
    such person shall not have any rights in or against any specific
    assets of the Company. All of the Awards granted under the Plan
    shall be unfunded.



 



    14.13  Risk of
    Participation.  Nothing contained in the Plan
    shall be construed either as a guarantee by Crosstex or its
    Affiliates, or their respective stockholders, directors,
    officers or employees, of the value of any assets of the Plan or
    as an agreement by Crosstex or its Affiliates, or their
    respective stockholders, directors, officers or employees, to
    indemnify anyone for any losses, damages, costs or expenses
    resulting from participation in the Plan.



 



    14.14  Section 409A of the
    Code.  All Awards under this Plan are intended
    either to be exempt from, or to comply with the requirements of
    Section 409A, and this Plan and all Awards shall be
    interpreted and operated in a




    

    12








 






    manner consistent with that intention. Notwithstanding anything
    in this Plan to the contrary, if any Plan provision or Award
    under this Plan would result in the imposition of an applicable
    tax under Section 409A, that Plan provision or Award shall
    be reformed to avoid imposition of the applicable tax and no
    such action shall be deemed to adversely affect the
    Participant’s rights to an Award.



 



    14.15  No Guarantee of Tax
    Consequences.  No person connected with the Plan
    in any capacity, including, but not limited to, Crosstex and the
    Affiliates and their respective directors, officers, agents and
    employees, makes any representation, commitment or guarantee
    that any tax treatment, including, but not limited to, federal,
    state and local income, estate and gift tax treatment, will be
    applicable with respect to any Awards or payments thereunder
    made to or for the benefit of a Participant under the Plan or
    that such tax treatment will apply to or be available to a
    Participant on account of participation in the Plan.



 



    14.16  Continued Employment or
    Service.  Nothing contained in the Plan or in any
    Award Agreement shall confer upon any Participant the right to
    continue in the employ or service of the Company, or interfere
    in any way with the rights of the Company to terminate a
    Participant’s employment or service at any time, with or
    without cause.



 



    14.17  Miscellaneous.  Headings are
    given to the articles and sections of the Plan solely as a
    convenience to facilitate reference. Such headings shall not be
    deemed in any way material or relevant to the construction of
    the Plan or any provisions hereof. The use of the masculine
    gender shall also include within its meaning the feminine.
    Wherever the context of the Plan dictates, the use of the
    singular shall also include within its meaning the plural, and
    vice versa.




    

    13