Related Party Transactions and Outside Related Director Information

Crosstex Energy, Inc. (XTXI)

3/31/2006 Proxy Information

Relationship with Crosstex Energy, L.P.

General. We indirectly own 2,999,000 common units and 7,001,000 subordinated units representing an aggregate 37.7% limited partnership interest in Crosstex Energy, L.P. (the “Partnership”), the 2% general partner interest in it and the incentive distribution rights. Our ability, as owner of the general partner, to manage and operate Crosstex Energy, L.P. and our ownership of an aggregate 37.7% limited partner interest effectively gives us the ability to veto some of the Partnership’s actions and to control its management.

Omnibus Agreement. Concurrent with the closing of the Partnership’s initial public offering, we entered into an agreement with it, Crosstex Energy GP, LLC and the Partnership’s general partner which will govern potential competition among us and the other parties to the agreement. We agreed, and caused our controlled affiliates to agree, for so long as management, Yorktown Energy Partners IV, L.P. and Yorktown Energy Partners V, L.P. and its affiliates, or any combination thereof, control the Partnership’s general partner, 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 it 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 their 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 Partnership’s initial public offering. Except as provided above, we and our controlled affiliates are not prohibited from engaging in activities in which they compete directly with the Partnership. In addition, Yorktown Energy Partners IV, L.P., Yorktown Energy Partners V, L.P. and any affiliated Yorktown funds are not prohibited from owning or engaging in businesses which compete with us or the Partnership.

Related Party Transactions

Camden Resources, Inc. The Partnership treats gas for, and purchases gas from, Camden Resources, Inc. Yorktown Energy Partners IV, L.P. has made equity investments in both Camden and Crosstex Energy, Inc. The gas treating and gas purchase agreements we have entered into with Camden are standard industry agreements containing terms substantially similar to those contained in our agreements with other third parties. During the year ended December 31, 2005, the Partnership purchased natural gas from Camden Resources, Inc. in the amount of approximately $67.2 million and received approximately $2.6 million in treating fees from Camden Resources, Inc.

Crosstex Pipeline Company. Prior to December 31, 2004, the Partnership indirectly owned general and limited partner interests in Crosstex Pipeline Partners, L.P. (“CPP”) that represented a 28% economic interest. On December 31, 2004, the Partnership acquired all of the other limited and general partner interests of this partnership for $5.1 million. Purchased assets included current assets of $1.8 million offset by current liabilities assumed of $1.6 million and property, plant and equipment of approximately $5.0 million. This acquisition makes the Partnership the sole limited partner of CPP and Crosstex Pipeline, LLC (a wholly-owned subsidiary of the Partnership) the sole general partner. The Partnership has entered into various transactions with CPP, and it believes that the terms of these transactions are comparable to those that it could have negotiated with unrelated third parties.

Crosstex Denton County Gathering J.V. The Partnership owns a 50% interest in Crosstex Denton County Gathering, J.V. (“CDC”). CDC was formed to build, own and operate a natural gas gathering system in Denton County, Texas. The Partnership manages the business affairs of CDC. The other 50% joint venture partner (the CDC Partner) is an unrelated third party who owns and operates the natural gas field in Denton County. In connection with the formation of CDC, the Partnership agreed to loan the CDC Partner up to $1.5 million for their initial capital contribution. The loan bears interest at an annual rate of prime plus 2%. CDC makes payments directly to us attributable to CDC Partner’s 50% share of distributable cash flow to repay the loan. Any balance remaining on the note is due in August 2007.

Lone Star Steel Company. In connection with the Partnership’s completion of the North Texas Pipeline project, during fiscal year 2005 the Partnership purchased approximately $546,000 of steel from Lone Star Steel Company, a subsidiary of Lone Star Technologies, Inc. Rhys J. Best, a director of Crosstex Energy GP, LLC, is the Chairman and Chief Executive Officer of Lone Star Technologies, Inc. The Partnership believes that the terms of the transactions with Lone Star are comparable to those that it could have negotiated with other third parties.

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:

• 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

• to two affiliated stockholders with an interest in us, 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.

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 Partnership’s general partner does not receive any management fee or other compensation in connection with its management of the Partnership’s 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 Partnership’s general partner owns a 2% general partner interest in the Partnership and all of the incentive distribution rights. The Partnership’s 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.