Exhibit 10.26

STRATUS PROPERTIES INC.

1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

ARTICLE I
PURPOSE OF THE PLAN

The purpose of the 1996 Stock Option Plan for Non-Employee Directors (the
“Plan”) is to align more closely the interests of the non-employee directors of
Stratus Properties Inc. (the “Company”) with that of the Company’s stockholders
by providing for the automatic grant to such directors of stock options
(“Options”) to purchase Shares (as hereinafter defined), in accordance with the
terms of the Plan.

ARTICLE II
DEFINITIONS

For the purposes of this Plan, the following terms shall have the meanings
indicated:

Board:  The Board of Directors of the Company.

Change in Control:  A Change in Control shall be deemed to have occurred if
either (a) any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, shall own beneficially more than 20% of
the Common Stock outstanding (exclusive of shares held in the Company’s treasury
or by the Company’s Subsidiaries) pursuant to a tender offer, exchange offer or
series of purchases or other acquisitions, or any combination of those
transactions, or (b) there shall be a change in the composition of the Board at
any time within two years after any tender offer, exchange offer, merger,
consolidation, sale of assets or contested election, or any combination of those
transactions (a “Transaction”), so that (i) the persons who were directors of
the Company immediately before the first such Transaction cease to constitute a
majority of the Board of Directors of the corporation that shall thereafter be
in control of the companies that were parties to or otherwise involved in such
Transaction, or (ii) the number of persons who shall thereafter be directors of
such corporation shall be fewer than two-thirds of the number of directors of
the Company immediately prior to such first Transaction.  A Change in Control
shall be deemed to take place upon the first to occur of the events specified in
the foregoing clauses (a) and (b).

Code:  The Internal Revenue Code of 1986, as amended from time to time.

Committee:  A committee of the Board designated by the Board to administer the
Plan and composed of not fewer than two directors, each of whom, to the extent
necessary to comply with Rule 16b-3 only, is a “non-employee director” within
the meaning of Rule 16b-3 and, to the extent necessary to comply with Section
162(m) only, is an “outside director” under Section 162(m).  Until otherwise
determined by the Board, the Committee shall be the Corporate Personnel
Committee of the Board.

Election Period:  The period beginning on the third business day following a
date on which the Company releases for publication its quarterly or annual
summary statements of sales and earnings, and ending on the twelfth business day
following such date.

Eligible Director:  A director of the Company who is not an officer or an
employee of the Company or a Subsidiary or an officer or an employee of an
entity with which the Company has contracted to receive management services.

Exchange Act:  The Securities Exchange Act of 1934, as amended from time to
time.

Fair Market Value.  Except as provided below in connection with a cashless
exercise, for any purpose relevant under the Plan, the fair market value of a
Share or any other security shall be the average of the high and low quoted per
Share or security sale prices on the Nasdaq National Market System on the date
in question or, if there are no reported sales on such date, on the last
preceding date on which any reported sale occurred.  In the context of a
cashless exercise, the fair market value shall be the price at which the Shares
are actually sold.

Option Cancellation Gain:  With respect to the cancellation of an Option
pursuant to Section 3 of Article IV hereof, the excess of the Fair Market Value
as of the Option Cancellation Date (as that term is defined in Section 3 of
Article IV hereof) of all the outstanding Shares covered by such Option, whether
or not then exercisable, over the purchase price of such Shares under such
Option.

Rule 16b-3:  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.

SEC:  The Securities and Exchange Commission, including the staff thereof, or
any successor thereto.

Section 162(m):  Section 162(m) of the Code and all regulations promulgated
thereunder as in effect from time to time.

Shares:  Shares of common stock, par value $0.01 per share, of the Company
(including any attached Preferred Stock Purchase Rights).

Subsidiary:  Any corporation of which stock representing at least 50% of the
ordinary voting power is owned, directly or indirectly, by the Company; and any
other entity of which equity securities or interests representing at least 50%
of the ordinary voting power or 50% of the total value of all classes of equity
securities or interests of such entity are owned, directly or indirectly, by the
Company.

ARTICLE III
ADMINISTRATION OF THE PLAN

This Plan shall be administered by the Board.  The Board will interpret this
Plan and may from time to time adopt such rules and regulations for carrying out
the terms and provisions of this Plan as it may deem best; however, the Board
shall have no discretion with respect to the selection of directors who receive
Options, the timing of the grant of Options, the number of Shares subject to any
Options or the purchase price thereof.  Notwithstanding the foregoing, the
Committee shall have the authority to make all determinations with respect to
the transferability of Options in accordance with Article VIII hereof.  All
determinations by the Board or the Committee shall be made by the affirmative
vote of a majority of its respective members, but any determination reduced to
writing and signed by a majority of its respective members shall be fully as
effective as if it had been made by a majority vote at a meeting duly called and
held.  Subject to any applicable provisions of the Company’s By-Laws or of this
Plan, all determinations by the Board and the Committee pursuant to the
provisions of this Plan, and all related orders or resolutions of the Board and
the Committee, shall be final, conclusive and binding on all persons, including
the Company and its stockholders, employees, directors and optionees.  In the
event of any conflict or inconsistency between determinations, orders,
resolutions, or other actions of the Committee and the Board taken in connection
with this Plan, the action of the Board shall control.

ARTICLE IV
STOCK SUBJECT TO THE PLAN

Section 1.

The Shares to be issued or delivered upon exercise of Options shall be made
available, at the discretion of the Board, either from the authorized but
unissued Shares of the Company or from Shares reacquired by the Company,
including Shares purchased by the Company in the open market or otherwise
obtained; provided, however, that the Company, at the discretion of the Board,
may, upon exercise of Options granted under this Plan, cause a Subsidiary to
deliver Shares held by such Subsidiary.

Section 2.

Subject to the provisions of Section 3 of this Article IV, the aggregate number
of Shares that may be purchased pursuant to Options shall not exceed 125,000.

Section 3.

In the event of the payment of any dividends payable in Shares, or in the event
of any subdivision or combination of the Shares, the number of Shares that may
be purchased under this Plan, and the number of Shares subject to each Option
granted in accordance with Section 2 of Article VII, shall be increased or
decreased proportionately, as the case may be, and the number of Shares
deliverable upon the exercise thereafter of any Option theretofore granted
(whether or not then exercisable) shall be increased or decreased
proportionately, as the case may be, without change in the aggregate purchase
price.  In the event the Company is merged or consolidated into or with another
corporation in a transaction in which the Company is not the survivor, or in the
event that substantially all of the Company ‘s assets are sold to another entity
not affiliated with the Company, any holder of an Option, whether or not then
exercisable, shall be entitled to receive (unless the Company shall take such
alternative action as may be necessary to preserve the economic benefit of the
Option for the optionee) on the effective date of any such transaction (the
“Option Cancellation Date”), in cancellation of such Option, an amount in cash
equal to the Option Cancellation Gain relating thereto, determined as of the
Option Cancellation Date.

ARTICLE V
PURCHASE PRICE OF OPTIONED SHARES

The purchase price per Share under each Option shall be 100% of the Fair Market
Value of a Share at the time such Option is granted, but in no case shall such
price be less than the par value of the Shares subject to such Option.

ARTICLE VI
ELIGIBILITY OF RECIPIENTS

Options will be granted only to individuals who are Eligible Directors at the
time of such grant.

ARTICLE VII
GRANT OF OPTIONS

Section 1.

Each Option shall constitute a nonqualified stock option that is not intended to
qualify under Section 422 of the Code.

Section 2.

On September 1, 1996, each Eligible Director as of such date shall be granted an
Option to purchase 10,000 Shares, and, on September 1 of each subsequent year,
each Eligible Director as of each such date shall be granted an Option to
purchase 2,500 Shares.  Each Option shall become exercisable in four equal
annual installments on each of the first four anniversaries of the date of grant
and may be exercised by the holder thereof with respect to all or any part of
the Shares comprising each installment as such holder may elect at any time
after such installment becomes exercisable but no later than the termination
date of such Option; provided that each Option shall become exercisable in full
upon a Change in Control.

ARTICLE VIII
TRANSFERABILITY OF OPTIONS

No Options granted hereunder may be transferred, pledged, assigned or otherwise
encumbered by an optionee except:

(a)

by will;

(b)

by the laws of descent and distribution; or

(c)

if permitted by the Committee and so provided in the Option or an amendment
thereto, (i) pursuant to a domestic relations order, as defined in the Code,
(ii) to Immediate Family Members, (iii) to a partnership in which Immediate
Family Members, or entities in which Immediate Family Members are the owners,
members or beneficiaries, as appropriate, are the partners, (iv) to a limited
liability company in which Immediate Family Members, or entities in which
Immediate Family Members are the owners, members or beneficiaries, as
appropriate, are the members, or (v) to a trust for the benefit of Immediate
Family Members; provided, however, that no more than a de minimus beneficial
interest in a partnership, limited liability company or trust described in
(iii), (iv) or (v) above may be owned by a person who is not an Immediate Family
Member or by an entity that is not beneficially owned solely by Immediate Family
Members.  “Immediate Family Members” shall be defined as the spouse and natural
or adopted children or grandchildren of the optionee and their spouses.

Any attempted assignment, transfer, pledge, hypothecation or other disposition
of Options, or levy of attachment or similar process upon Options not
specifically permitted herein, shall be null and void and without effect.

ARTICLE IX
EXERCISE OF OPTIONS

Section 1.

Each Option shall terminate 10 years after the date on which it was granted.

Section 2.

Except in cases provided for in Article X hereof, each Option may be exercised
by the holder thereof only while the optionee to whom such Option was granted is
an Eligible Director.

Section 3.

Each Option shall provide that the Option or any portion thereof may be
exercised only during an Election Period.  Each Option shall provide, however,
that in the event of a Change in Control, the Election Period exercise
requirement is waived.

Section 4.

A person electing to exercise an Option or any portion thereof then exercisable
shall give written notice to the Company of such election and of the number of
Shares such person has elected to purchase, and shall at the time of purchase
tender the full purchase price of such Shares, which tender shall be made in
cash or cash equivalent (which may be such person ‘s personal check) or in
Shares already owned by such person and held for at least six months (which
tender may be by actual delivery or by attestation) and which Shares shall be
valued for such purpose on the basis of their Fair Market Value on the date of
exercise, or in any combination thereof.  The Company shall have no obligation
to deliver Shares pursuant to the exercise of any Option, in whole or in part,
until such payment in full of the purchase price of such Shares is received by
the Company.  No optionee, or legal representative, legatee, distributee, or
assignee of such optionee shall be or be deemed to be a holder of any Shares
subject to such Option or entitled to any rights of a stockholder of the Company
in respect of any Shares covered by such Option distributable in connection
therewith until such Shares have been paid for in full and have been issued or
delivered by the Company.

Section 5.

Each Option shall be subject to the requirement that if at any time the Board
shall be advised by counsel that the listing, registration or qualification of
the Shares subject to such Option upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of such Option or the issue or purchase of Shares thereunder, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free from any conditions not reasonably acceptable to such counsel for
the Board.

Section 6.

The Company may establish appropriate procedures to provide for payment or
withholding of such income or other taxes as may be required by law to be paid
or withheld in connection with the exercise of Options, and to ensure that the
Company receives prompt advice concerning the occurrence of any event that may
create, or affect the timing or amount of, any obligation to pay or withhold any
such taxes or that may make available to the Company any tax deduction resulting
from the occurrence of such event.

ARTICLE X
TERMINATION OF SERVICE
AS AN ELIGIBLE DIRECTOR

Section 1.

If and when an optionee shall cease to be an Eligible Director for any reason
other than death or retirement from the Board, all of the Options granted to
such optionee  shall be terminated except that any Option, to the extent then
exercisable, may be exercised by the holder thereof within three months after
such optionee ceases to be an Eligible Director, but not later than the
termination date of the Option.

Section 2.

If and when an optionee shall cease to be an Eligible Director by reason of the
optionee’s retirement from the Board, all of the Options granted to such
optionee shall be terminated except that any Option, to the extent then
exercisable or exercisable within one year thereafter, may be exercised by the
holder thereof within three years after such retirement, but not later than the
termination date of the Option.

Section 3.

Should an optionee die while serving as an Eligible Director, all the Options
granted to such optionee shall be terminated, except that any Option to the
extent exercisable by the holder thereof at the time of such death, together
with the unmatured installment (if any) of such Option which at that time is
next scheduled to become exercisable, may be exercised until the third
anniversary of the date of such death, but not later than the termination date
of the Option, by the holder thereof, the optionee’s estate, or the person
designated in the optionee’s last will and testament, as appropriate.

Section 4.

Should an optionee die after ceasing to be an Eligible Director, all of the
 Options granted to such optionee shall be terminated, except that any Option,
to the extent exercisable by the holder thereof at the time of such death, may
be exercised until the third anniversary of the date the Participant ceased to
be an Eligible Director, but not later than the termination date of the Option,
by the holder thereof, the optionee’s estate, or the person designated in the
optionee’s last will and testament, as appropriate.  

ARTICLE XI
AMENDMENTS TO PLAN AND OPTIONS

The Board may at any time terminate or from time to time amend, modify or
suspend this Plan; provided, however, that no such amendment or modification
without the approval of the stockholders shall:

(a)

except pursuant to Section 3 of Article IV, increase the maximum number
(determined as provided in this Plan) of Shares that may be purchased pursuant
to Options, either individually on an annual basis or in the aggregate; or

(b)

permit the granting of any Option at a purchase price other than 100% of the
Fair Market Value of the Shares at the time such Option is granted, subject to
adjustment pursuant to Section 3 of Article IV.