Document:

Exhibit 10.1

    
      

    

    Exhibit
      10.1

     

    Change
      of Control Agreement

    

    This
      Change of Control Agreement (“Agreement”) between Stratus Properties Inc., a
      Delaware corporation (the “Company”), and William H. Armstrong III (the
“Executive”) is dated effective as of January 26, 2007 (the “Agreement
      Date”).

     

    ARTICLE
      I 

    Definitions

     

    1.1  Board.
“Board”
      shall mean the Board of Directors of the Company, or if after a Change of
      Control, the Post-Transaction Corporation.

     

    1.2  Cause.
“Cause”
      shall mean:

     

    (a)  The
      Executive’s willful and continued failure to perform substantially the
      Executive’s duties with the Post-Transaction Corporation or its Affiliates
      (other than any such failure resulting from incapacity due to physical or mental
      illness), after a written demand for substantial performance is delivered to
      the
      Executive by the Board, which specifically identifies the manner in which the
      Board believes that the Executive has not substantially performed the
      Executive’s duties;

     

    (b)  The
      willful engaging by the Executive in conduct that is demonstrably and materially
      injurious to the Post-Transaction Corporation or any or its Affiliates,
      monetarily or otherwise; or

     

    (c)  The
      final
      conviction of the Executive or an entering of a guilty plea or a plea of no
      contest by the Executive to a felony.

     

    For
      purposes of this provision, no act or failure to act, on the part of the
      Executive, will be considered “willful” unless it is done, or omitted to be
      done, by the Executive in bad faith or without a reasonable belief that the
      act
      or omission was in the best interest of the Post-Transaction Corporation or
      its
      Affiliates. Any act, or failure to act, based on authority given pursuant to
      a
      resolution duly adopted by the Board or the advice of counsel to the
      Post-Transaction Corporation or its Affiliates will be conclusively presumed
      to
      be done, or omitted to be done, by the Executive in good faith and in the best
      interests of the Post-Transaction Corporation or its Affiliates. The termination
      of employment of the Executive will not be deemed to be for Cause unless and
      until there has been delivered to the Executive a copy of a resolution duly
      adopted by the affirmative vote of not less than three-quarters of the entire
      membership of the Board at a meeting of the Board called and held for such
      purpose (after reasonable notice is provided to the Executive and the Executive
      is given an opportunity, together with counsel, to be heard before the Board),
      finding that, in the good faith opinion of the Board, the Executive has engaged
      in the conduct described in subparagraph (a), (b) or (c) above, and specifying
      the particulars of such conduct.

    

    1.3  Change
      of Control.
      (a)“Change
      of Control” means (capitalized terms not otherwise defined will have the
      meanings ascribed to them in paragraph (b) below):

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (i)  the
      acquisition by any Person together with all Affiliates of such Person, of
      Beneficial Ownership of the Threshold Percentage or more; provided, however,
      that for purposes of this Section 1.3(a)(i), the following will not constitute
      a
      Change of Control:

     

    (A)  any
      acquisition (other than a “Business Combination,” as defined below, that
      constitutes a Change of Control under Section 1.3(a)(iii) hereof) of Common
      Stock directly from the Company,

     

    (B)  any
      acquisition of Common Stock by the Company or its subsidiaries,

     

    (C)  any
      acquisition of Common Stock by any employee benefit plan (or related trust)
      sponsored or maintained by the Company or any corporation or other entity
      controlled by the Company, or

     

    (D)  any
      acquisition of Common Stock pursuant to a Business Combination that does not
      constitute a Change of Control under Section 1.3(a)(iii) hereof; or

     

    (ii)  individuals
      who, as of the effective date of this Agreement, constitute the Board (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 effective date of this Agreement whose election, or nomination for election
      by the Company’s shareholders, was approved by a vote of at least a majority of
      the directors then comprising the Incumbent Board will be considered a member
      of
      the Incumbent Board, unless such individual’s initial assumption of office
      occurs as a result of an actual or threatened election contest with respect
      to
      the election or removal of directors or any other actual or threatened
      solicitation of proxies or consents by or on behalf of a Person other than
      the
      Incumbent Board; or

     

    (iii)  the
      consummation of a reorganization, merger or consolidation (including a merger
      or
      consolidation of the Company or any direct or indirect subsidiary of the
      Company), or sale or other disposition of all or substantially all of the assets
      of the Company (a “Business Combination”), in each case, unless, immediately
      following such Business Combination:

     

    (A)  the
      individuals and entities who were the Beneficial Owners of the Company Voting
      Stock immediately prior to such Business Combination have direct or indirect
      Beneficial Ownership of more than 50% of the then outstanding shares of common
      stock, and more than 50% of the combined voting power of the then outstanding
      voting securities entitled to vote generally in the election of directors,
      of
      the Post-Transaction Corporation, and

     

    (B)  no
      Person
      together with all Affiliates of such Person (excluding the Post-Transaction
      Corporation and any employee benefit plan or related trust of either the
      Company, the Post-Transaction Corporation or any subsidiary of either
      corporation) Beneficially Owns 30% or more of the then outstanding shares of
      common stock of the Post-Transaction Corporation or 30% or more of the combined
      voting power of the then outstanding voting securities of the Post-Transaction
      Corporation, and

     

    
      
         

      

      
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    (C)  at
      least
      a majority of the members of the board of directors of the Post-Transaction
      Corporation were members of the Incumbent Board at the time of the execution
      of
      the initial agreement, and of the action of the Board, providing for such
      Business Combination; or

     

    (iv)  approval
      by the shareholders of the Company of a complete liquidation or dissolution
      of
      the Company.

     

    (b)  As
      used
      in this Section 1.3 and elsewhere in this Agreement, the following terms have
      the meanings indicated:

     

    (i)  Affiliate:
      “Affiliate” means a Person that directly, or indirectly through one or more
      intermediaries, controls, or is controlled by, or is under common control with,
      another specified Person. 

     

    (ii)  Beneficial
      Owner: “Beneficial Owner” (and variants thereof), with respect to a security,
      means a Person who, directly or indirectly (through any contract, understanding,
      relationship or otherwise), has or shares (A) the power to vote, or direct
      the
      voting of, the security, and/or (B) the power to dispose of, or to direct the
      disposition of, the security.

     

    (iii)  Company
      Voting Stock: “Company Voting Stock” means any capital stock of the Company that
      is then entitled to vote for the election of directors.

     

    (iv)  Majority
      Shares: “Majority Shares” means the number of shares of Company Voting Stock
      that could elect a majority of the directors of the Company if all directors
      were to be elected at a single meeting.

     

    (v)  Person:
      “Person” means a natural person or entity, and will also mean the group or
      syndicate created when two or more Persons act as a syndicate or other group
      (including without limitation a partnership, limited partnership, joint venture
      or other joint undertaking) for the purpose of acquiring, holding, or disposing
      of a security, except that “Person” will not include an underwriter temporarily
      holding a security pursuant to an offering of the security.

     

    (vi)  Post-Transaction
      Corporation: Unless a Change of Control includes a Business Combination,
“Post-Transaction Corporation” means the Company after the Change of Control. If
      a Change of Control includes a Business Combination, “Post-Transaction
      Corporation” will mean the corporation or other entity resulting from the
      Business Combination unless, as a result of such Business Combination, an
      ultimate parent entity controls the Company or all or substantially all of
      the
      Company’s assets either directly or indirectly, in which case, “Post-Transaction
      Corporation” will mean such ultimate parent entity.

     

    (vii)  Threshold
      Percentage: “Threshold Percentage” means 30% of all then outstanding Company
      Voting Stock.

     

    1.4  Code.
“Code”
      shall mean the Internal Revenue Code of 1986, as amended from time to
      time.

     

    
      
         

      

      
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    1.5  Common
      Stock:
“Common
      Stock” shall mean the common stock, $0.01 par value per share, of the
      Company.

     

    1.6  Company.
      As used
      in this Agreement, “Company” shall mean the Company as defined above and any
      successor to or assignee of (whether direct or indirect, by purchase, merger,
      consolidation or otherwise) all or substantially all of the assets of the
      Company.

     

    1.7  Disability.
      “Disability” shall mean:

     

    (a)  A
      disability entitling the Executive to receive benefits under a long-term
      disability insurance policy maintained by the Post-Transaction Corporation
      or an
      Affiliate in effect at the time either because he is totally disabled or
      partially disabled, as such terms are defined in such policy in effect as of
      the
      Agreement Date or as similar terms are defined in any successor policy.

     

    (b)  If
      there
      is no long-term disability plan in effect covering the Executive, and if (i)
      a
      physical or mental illness renders the Executive incapable of satisfactorily
      discharging his duties and responsibilities to the Post-Transaction Corporation
      or an Affiliate for a period of 90 consecutive days, and (ii) such incapacity
      is
      certified in writing by a duly qualified physician chosen by the
      Post-Transaction Corporation or an Affiliate and reasonably acceptable to the
      Executive or his legal representatives, then the Board will have the power
      to
      determine that the Executive has become disabled. If the Board makes such a
      determination, the Post-Transaction Corporation or its Affiliate will have
      the
      continuing right and option, during the period that such disability continues,
      and by notice given in the manner provided in this Agreement, to terminate
      the
      status of Executive as an officer and employee. Any such termination will become
      effective 60 days after such notice of termination is given, unless within
      such
      60-day period, the Executive becomes capable of rendering services of the
      character contemplated hereby (and a physician chosen by the Post-Transaction
      Corporation or an Affiliate and reasonably acceptable to the Executive or his
      legal representatives so certifies in writing) and the Executive in fact resumes
      such services.

     

    (c)  The
      “Disability Effective Date” will mean the date on which termination of
      Executive’s status as an officer and employee becomes effective due to
      Disability.

     

    1.8  Good
      Reason.
“Good
      Reason” shall mean:

     

    (a)  Any
      failure of the Post-Transaction Corporation to provide the Executive with the
      position, authority, duties and responsibilities at least commensurate in all
      material respects with the most significant of those held, exercised and
      assigned at any time during the 120-day period immediately preceding the Change
      of Control. Executive’s position, authority, duties and responsibilities after a
      Change of Control shall not be considered commensurate in all material respects
      with Executive’s position, authority, duties and responsibilities prior to a
      Change of Control unless after the Change of Control the Executive holds an
      equivalent position in the Post-Transaction Corporation; 

     

    (b)  The
      assignment to the Executive of any duties inconsistent in any material respect
      with Executive’s position (including status, offices, titles and reporting
      requirements), authority, duties or responsibilities as contemplated by Section
      2.1(b) of this Agreement, or any 

     

    
      
         

      

      
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    other
      action that results in a diminution in such position, authority, duties or
      responsibilities, excluding for this purpose an isolated, insubstantial and
      inadvertent action not taken in bad faith that is remedied within 10 days after
      receipt of written notice thereof from the Executive to the Post-Transaction
      Corporation;

     

    (c)  Any
      failure by the Post-Transaction Corporation or its Affiliates to comply with
      any
      of the provisions of this Agreement, other than an isolated, insubstantial
      and
      inadvertent failure not occurring in bad faith that is remedied within 10 days
      after receipt of written notice thereof from the Executive to the
      Post-Transaction Corporation; or

     

    (d)  The
      Post-Transaction Corporation or its Affiliates requiring the Executive to be
      based at any office or location other than as provided in Section 2.1(b)(ii)
      hereof or requiring the Executive to travel on business to a substantially
      greater extent than required immediately prior to the Change of
      Control.

     

    For
      purposes of this Section 1.4, any determination of “Good Reason” made by the
      Executive in good faith and based upon his reasonable belief and understanding
      shall be conclusive.

    

    1.9  Termination
      Date.
      “Termination Date” shall mean, if Executive’s status as an officer and employee
      is terminated (i) by reason of Executive’s death, the date of Executive’s death,
      (ii) by reason of Disability, the Disability Effective Date, (iii) by the
      Company other than by reason of death or Disability, the date of delivery of
      the
      notice of termination or any later date specified in the notice of termination,
      which date will not be more than 30 days after the giving of the notice, or
      (iv)
      by the Executive other than by reason of death, the date of delivery of the
      notice of termination or any later date specified in the notice of termination,
      which date will not be more than 30 days after the giving of the
      notice.

     

    ARTICLE
      II

    Change
      of Control Benefit

     

    2.1  Employment
      Term and Capacity after Change of Control.
      (a)
      This
      Agreement shall commence on the Agreement Date and continue in effect through
      January 26, 2010. If the Executive continues to serve as an officer of the
      Company and a Change of Control occurs on or before January 26, 2010, then
      the
      Executive’s employment term (the “Employment Term”) shall continue through the
      later of the third anniversary of the Change of Control, subject to any earlier
      termination of Executive’s status as an officer and employee pursuant to this
      Agreement.

     

    (b)  After
      a
      Change of Control and during the Employment Term, (i) the Executive’s position
      (including status, offices, titles and reporting requirements), authority,
      duties and responsibilities shall be at least commensurate in all material
      respects with the most significant of those held, exercised and assigned at
      any
      time during the 120-day period immediately preceding the Change of Control
      and
      (ii) the Executive’s services shall be performed at the location where the
      Executive was employed immediately preceding the Change of Control or any office
      or location less than 35 miles from such location. Executive’s position,
      authority, duties and responsibilities after a Change of Control shall not
      be
      considered commensurate in all material respects with Executive’s position,
      authority, duties and 

     

    
      
         

      

      
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    responsibilities
      prior to a Change of Control unless after the Change of Control the Executive
      holds an equivalent position in the Post-Transaction Corporation. 

     

    2.2  Compensation
      and Benefits.
      During
      the Employment Term, the Executive shall be entitled to the following
      compensation and benefits: 

     

    (a)  Salary.
      An
      annual salary (“Base Salary”) at the highest rate in effect for the Executive at
      any time during the 120-day period immediately preceding the Change of Control,
      payable to the Executive at such intervals no less frequent than the most
      frequent intervals in effect at any time during the 120-day period immediately
      preceding the Change of Control or, if more favorable to the Executive, the
      intervals in effect at any time after the Change of Control for other most
      senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    (b)  Bonus.
      Executive shall be entitled to participate in an annual incentive bonus program
      applicable to other most senior executives of the Post-Transaction Corporation
      and its Affiliates but in no event shall such program provide the Executive
      with
      incentive opportunities less favorable than the most favorable of those provided
      by the Company and its Affiliates for the Executive under the Company’s annual
      cash plan as in effect for Executive at any time during the 120-day period
      immediately preceding the Change of Control or, if more favorable to the
      Executive, those provided generally at any time after the Change of Control
      to
      other most senior executives of the Post-Transaction Corporation and its
      Affiliates. Any such bonus shall be paid in cash no later than 90 days following
      the close of the fiscal year for which it is earned.

     

    (c)  Fringe
      Benefits.
      The
      Executive shall be entitled to fringe benefits (including, but not limited
      to,
      automobile allowance, air travel, and reimbursement for club membership dues)
      in
      accordance with the most favorable agreements, plans, practices, programs and
      policies of the Company and its Affiliates in effect for the Executive at any
      time during the 120-day period immediately preceding the Change of Control
      or,
      if more favorable to the Executive, as in effect generally at any time
      thereafter with respect to other most senior executives of the Post-Transaction
      Corporation and its Affiliates.

     

    (d)  Expenses.
      The
      Executive shall be entitled to receive prompt reimbursement for all reasonable
      business expenses (including food and lodging) incurred by the Executive in
      accordance with the most favorable agreements, policies, practices and
      procedures of the Company and its Affiliates in effect for the Executive at
      any
      time during the 120-day period immediately preceding the Change of Control
      or,
      if more favorable to the Executive, as in effect generally at any time
      thereafter with respect to other most senior executives of the Post-Transaction
      Corporation and its Affiliates.

     

    (e)  Incentive,
      Savings and Retirement Plans.
      The
      Executive shall be entitled to participate in all incentive, savings and
      retirement plans, practices, policies and programs applicable generally to
      other
      most senior executives of the Post-Transaction Corporation and its Affiliates,
      but in no event shall such plans, practices, policies and programs provide
      the
      Executive with incentive opportunities (measured with respect to both regular
      and special incentive opportunities, to the extent, if any, that such
      distinction is applicable), savings 

     

    
      
         

      

      
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    opportunities
      and retirement benefit opportunities, in each case, less favorable than the
      most
      favorable of those provided by the Company and its Affiliates for the Executive
      under any agreements, plans, practices, policies and programs as in effect
      at
      any time during the 120-day period immediately preceding the Change of
      Control.

     

    (f)  Welfare
      Benefit Plans.
      The
      Executive and the Executive’s family shall be eligible for participation in and
      shall receive all benefits under welfare benefit plans, practices, policies
      and
      programs provided by the Post-Transaction Corporation and its Affiliates
      (including, without limitation, medical, prescription, dental, disability,
      employee life, group life, accidental death and travel accident insurance plans
      and programs) to the extent applicable generally to other most senior executives
      of the Post-Transaction Corporation and its Affiliates, but in no event shall
      such plans, practices, policies and programs provide the Executive with
      benefits, in each case, less favorable than the most favorable of any
      agreements, plans, practices, policies and programs of the Company and its
      Affiliates in effect for the Executive at any time during the 120-day period
      immediately preceding the Change of Control.

     

    (g)  Indemnification
      and Insurance.
      The
      Post-Transaction Corporation shall indemnify the Executive, to the fullest
      extent permitted by applicable law, for any and all claims brought against
      him
      arising out his services during or prior to the Employment Term. In addition,
      the Post-Transaction Corporation shall maintain a directors’ and officers’
insurance policy covering the Executive substantially in the form of the policy
      maintained by the Company and its Affiliates at any time during the 120-day
      period immediately preceding the Change of Control or, if more favorable to
      the
      Executive, as provided generally at any time thereafter with respect to other
      most senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    (h)  Office
      and Support Staff.
      The
      Executive shall be entitled to an office or offices of a size and with
      furnishings and other appointments, and to exclusive personal secretarial and
      other assistance, at least equal to the most favorable of the foregoing provided
      to the Executive by the Company and its Affiliates at any time during the
      120-day period immediately preceding the Change of Control or, if more favorable
      to the Executive, as provided generally at any time thereafter with respect
      to
      other most senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    (i)  Vacation.
      The
      Executive shall be entitled to paid vacation in accordance with the most
      favorable agreements, plans, policies, programs and practices of the Company
      and
      its Affiliates as in effect for the Executive at any time during the 120-day
      period immediately preceding the Change of Control or, if more favorable to
      the
      Executive, as in effect generally at any time thereafter with respect to other
      most senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    2.3  Obligations
      upon Termination after a Change of Control.

     

    (a)  Termination
      as a Result of Death, Disability or Retirement.
      If,
      after a Change of Control and during the Employment Term, (1) the Executive’s
      status as an officer and employee is terminated by reason of the Executive’s
      death, (2) the Post-Transaction Corporation terminates the Executive’s status as
      an officer and employee by reason of Executive’s Disability, 

     

    
      
         

      

      
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    or
      (3)
      the Executive retires and terminates his status as an officer and employee,
      then, subject to Section 2.3(f):

     

    (i)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive or his
      legal representatives the Executive’s Base Salary earned through the Termination
      Date to the extent not previously paid (the “Accrued Salary”); 

     

    (ii)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive or his
      legal representatives a pro rata bonus in an amount determined by calculating
      the average of the annual bonus received by the Executive in the three most
      recently completed fiscal years prior to the Termination Date, then multiplying
      such bonus amount by the fraction obtained by dividing the number of days in
      the
      year through the Termination Date by 365 (the “Pro Rata Bonus”), subject to any
      requirement under Section 409A of the Code that such payment be delayed for
      six
      months following termination of employment; and

     

    (iii)  The
      Post-Transaction Corporation or an Affiliate will pay or deliver, as
      appropriate, all other benefits earned by the Executive or accrued for his
      benefit pursuant to any employee benefit plans maintained by the
      Post-Transaction Corporation or its Affiliates with respect to services rendered
      by the Executive prior to the Termination Date.

     

    (b)  Termination
      by Company for Cause; by Executive for other than Good Reason.
      If,
      after a Change of Control and during the Employment Term, the Executive’s status
      as an officer and employee is terminated by the Post-Transaction Corporation
      or
      an Affiliate for Cause, or by the Executive for other than Good Reason, the
      Post-Transaction Corporation or Affiliate will pay to the Executive the Accrued
      Salary without further obligation to the Executive other than for obligations
      by
      law and obligations for any benefits earned by the Executive or accrued for
      his
      benefit pursuant to any employee benefit plans maintained by the
      Post-Transaction Corporation or Affiliate with respect to services rendered
      by
      the Executive prior to the Termination Date.

     

    (c)  Termination
      by Company for Reasons other than Death, Disability or Cause; by Executive
      under
      Certain Circumstances.
      If,
      after a Change of Control and during the Employment Term, (1) the
      Post-Transaction Corporation or an Affiliate terminates the Executive’s status
      as an officer and employee other than for Cause, death or Disability, or (2)
      the
      Executive terminates his status as an officer and employee for Good Reason,
      then, subject to Section 2.3(f) hereof:

     

    (i)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive the
      Accrued Salary; 

     

    (ii)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive in a
      lump
      sum in cash on the first business day that is more than six months after the
      Termination Date (A) the Pro Rata Bonus, and (B) an amount equal to 2.99 times
      the sum of (x) the Executive’s Base Salary in effect at the Termination Date and
      (y) the highest annual bonus awarded to the Executive during the three fiscal
      years immediately preceding the Termination Date (excluding any payments for
      long-term incentives); 

     

    
      
         

      

      
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    (iii)  For
      the
      period commencing on the Termination Date and ending on the earlier of (A)
      December 31st
      of the
      first calendar year following the calendar year in which the Termination Date
      occurs, or (B) the date that the Executive accepts new employment (the
“Continuation Period”), the Post-Transaction Corporation or an Affiliate will at
      its expense maintain and administer for the continued benefit of Executive
      all
      insurance and welfare benefit plans in which Executive was entitled to
      participate as an employee as of the Termination Date; provided that Executive’s
      continued participation is possible under the general terms and provisions
      of
      such plans and all applicable laws. The coverage and benefits (including
      deductibles and costs) provided under any such benefit plan in accordance with
      this paragraph during the Continuation Period will be no less favorable to
      Executive than the most favorable of such coverages and benefits as of the
      Termination Date; provided, however, in the event of the Disability of Executive
      during the Continuation Period, benefits will, to the maximum extent possible,
      not be paid for the Continuation Period but will instead commence immediately
      following the end of the Continuation Period. If Executive’s participation in
      any such benefit plan is barred or any such benefit plan is terminated, the
      Post-Transaction Corporation or its Affiliate will provide Executive with
      benefits substantially similar or comparable in value to those Executive would
      otherwise have been entitled to receive under such plans. The Executive
      acknowledges that if medical expenses are incurred during the Continuation
      Period but reimbursed after the end of the second calendar year following the
      calendar year in which the Termination Date occurs, then the Executive may
      be
      subject to taxes, penalties and interest under Section 409A of the Code. The
      Executive agrees to submit (or cause healthcare providers to submit) for payment
      or reimbursement all medical expenses covered under applicable plans that are
      incurred during the Continuation Period no later than July 1st
      of the
      second calendar year following the calendar year in which the Termination Date
      occurs, and the Post-Transaction Corporation or its Affiliate shall cause such
      covered medical expenses to be reimbursed by December 31st
      of such
      year. At the end of the Continuation Period, the Executive will have the option
      to have assigned to him, at no cost and with no apportionment of prepaid
      premiums, any assignable insurance owned by the Post-Transaction Corporation
      or
      its Affiliate that relates specifically to the Executive. To the maximum extent
      permitted by law, the Executive will be eligible for coverage under COBRA at
      the
      end of the Continuation Period or earlier cessation of the Post-Transaction
      Corporation’s obligation under the foregoing provisions of this paragraph;

     

    (iv)  All
      benefits that the Executive is entitled to receive pursuant to benefit plans
      maintained by the Post-Transaction Corporation or an Affiliate under which
      benefits are calculated based upon years of service or age will be calculated
      by
      treating the Executive as having attained two additional years of age and as
      having provided two additional years of service as of the Termination Date;
      and

     

    (v)  The
      Post-Transaction Corporation or an Affiliate will pay or deliver, as
      appropriate, all other benefits earned by the Executive or accrued for his
      benefit pursuant to any employee benefit plans maintained by the
      Post-Transaction Corporation or Affiliate with respect to services rendered
      by
      the Executive prior to the Termination Date.

     

    (d)  No
      Acceleration of Payments.
      No
      acceleration of payments and benefits provided herein shall be permitted, except
      that the Post-Transaction Corporation may accelerate payment, if permitted
      under
      the regulations under Section 409A of the Code, as necessary to allow the
      Executive to pay FICA taxes on amounts payable hereunder and additional taxes
      

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    resulting
      from the payment of such FICA amount or as necessary to pay taxes and penalties
      arising as a result of the payments provided for in this Agreement failing
      to
      meet the requirements of Section 409A of the Code.

     

    (e)  Resignation
      from Board of Directors.
      If the
      Executive is a director of the Post-Transaction Corporation or any of its
      Affiliates and his status as an officer and employee is terminated for any
      reason other than death, the Executive will, if requested by the
      Post-Transaction Corporation, immediately resign as a director of the
      Post-Transaction Corporation and its Affiliates. If such resignation is not
      received within 20 business days after the Executive actually receives written
      notice from the Post-Transaction Corporation requesting the resignation, the
      Executive will forfeit any right to receive any payments pursuant to this
      Agreement.

     

    (f)  Nondisclosure
      and Proprietary Rights.
      The
      rights and obligations of the Company and the Executive contained in Article
      III
      hereof will continue to apply notwithstanding a termination following a Change
      of Control.

     

    (g)  Most
      Favorable Benefits.
      It is
      the intention of the parties that the terms of this Agreement provide payments
      and benefits to the Executive that are equivalent or more beneficial to the
      Executive than are otherwise available to the Executive under the terms of
      any
      applicable benefit plan or related compensation agreement. To that end, the
      terms of the Agreement shall govern the payments and benefits to which the
      Executive shall be entitled upon the termination of the Executive’s status as an
      officer and employee as provided herein, except that if the terms of any
      applicable benefit plan or related compensation agreement provide more favorable
      benefits to the Executive than are provided hereunder, the terms of such plan
      or
      agreement shall control. 

     

    2.4  Excise
      Tax Provision.
      

     

    (a)  Notwithstanding
      any other provisions of this Agreement, if a Change of Control occurs during
      the
      original or extended term of this Agreement, in the event that any payment
      or
      benefit received or to be received by the Executive in connection with the
      Change of Control of the Company or the termination of the Executive’s
      employment under this Agreement or any other agreement between the Company
      and
      the Executive (all such payments and benefits, including the payments and
      benefits under Section 2.3(c) hereof, being hereinafter called “Total Payments”)
      would be subject (in whole or in part), to an excise tax imposed by section
      4999
      of the Code (the “Excise Tax”), then the cash payments under Section 2.3(c)
      hereof shall first be reduced, and the noncash payments and benefits under
      the
      other sections hereof shall thereafter be reduced, to the extent necessary
      so
      that no portion of the Total Payments is subject to the Excise Tax but only
      if
      (A) the net amount of such Total Payments, as so reduced (and after subtracting
      the net amount of federal, state and local income and employment taxes on such
      reduced Total Payments) is greater than or equal to (B) the net amount of such
      Total Payments without such reduction (but after subtracting the net amount
      of
      federal, state and local income and employment taxes on such Total Payments
      and
      the amount of Excise Tax to which the Employee would be subject in respect
      of
      such unreduced Total Payments); provided, however, that the Executive may elect
      to have the noncash payments and benefits hereof reduced (or eliminated) prior
      to any reduction of the cash payments under Section 2.3(c) hereof.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (b)  For
      purposes of determining whether and the extent to which the Total Payments
      will
      be subject to the Excise Tax, (i) no portion of the Total Payments the receipt
      or enjoyment of which the Executive shall have waived at such time and in such
      manner as not to constitute a “payment” within the meaning of section 280G(b) of
      the Code shall be taken into account, (ii) no portion of the Total Payments
      shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”)
      reasonably acceptable to the Executive and selected by the accounting firm
      (the
“Auditor”) which was, immediately prior to a Change of Control or other event
      giving rise to a potential Excise Tax, the Company’s independent auditor, does
      not constitute a “parachute payment” within the meaning of section 280G(b)(2) of
      the Code (including by reason of section 280G(b)(4)(A) of the Code) and, in
      calculating the Excise Tax, no portion of such Total Payments shall be taken
      into account which, in the opinion of Tax Counsel, constitutes reasonable
      compensation for services actually rendered, within the meaning of section
      280G(b)(4)(B) of the Code, in excess of the “Base Amount” (within the meaning
      set forth in section 280G(b)(3) of the Code) allocable to such reasonable
      compensation, and (iii) the value of any non-cash benefit or any deferred
      payment or benefit included in the Total Payments shall be determined by the
      Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
      the
      Code.

     

    (c)  At
      the
      time that payments are made under this Agreement, the Post-Transaction
      Corporation shall provide the Executive with a written statement setting forth
      the manner in which such payments were calculated and the basis for such
      calculations including, without limitation, any opinions or other advice the
      Post-Transaction Corporation has received from Tax Counsel, the Auditor or
      other
      advisors or consultants (and any such opinions or advice which are in writing
      shall be attached to the statement).

     

    2.5  Stock
      Options; Restricted Stock Units.
      The
      foregoing benefits are intended to be in addition to the value of any options
      to
      acquire Common Stock of the Company, the exercisability of which is accelerated
      pursuant to the terms of any stock option agreement, any restricted stock units
      the vesting of which is accelerated pursuant to the terms of the restricted
      stock unit agreement, and any other incentive or similar plan heretofore or
      hereafter adopted by the Company.

     

    2.6  Legal
      Fees.
      The
      Company agrees to pay as incurred all legal fees and expenses that the Executive
      may reasonably incur as a result of any contest (regardless of the outcome
      thereof) by the Company, the Executive or others of the validity or
      enforceability of, or liability under, any provision of this Agreement
      (including as a result of any contest by the Executive about the amount or
      timing of any payment pursuant to this Agreement).

     

    ARTICLE
      III

    Nondisclosure
      and Proprietary Rights

     

    3.1  Confidential
      Information.
      For
      purposes of this Agreement, the term “Confidential Information” means any
      information, knowledge or data of any nature and in any form (including
      information that is electronically transmitted or stored on any form of magnetic
      or electronic storage media) relating to the past, current or prospective
      business or operations of the Company and its Affiliates, that at the time
      or
      times concerned is not generally known to persons engaged in businesses similar
      to those conducted or contemplated by the Company and 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    its
      Affiliates (other than information known by such persons through a violation
      of
      an obligation of confidentiality to the Company), whether produced by the
      Company and its Affiliates or any of their consultants, agents or independent
      contractors or by Executive, and whether or not marked confidential, including
      without limitation information relating to the Company’s or its Affiliates’
products and services, business plans, business acquisitions, processes, product
      or service research and development ideas, methods or techniques, training
      methods and materials, and other operational methods or techniques, quality
      assurance procedures or standards, operating procedures, files, plans,
      specifications, proposals, drawings, charts, graphs, support data, trade
      secrets, supplier lists, supplier information, purchasing methods or practices,
      distribution and selling activities, consultants’ reports, marketing and
      engineering or other technical studies, maintenance records, employment or
      personnel data, marketing data, strategies or techniques, financial reports,
      budgets, projections, cost analyses, price lists, formulae and analyses,
      employee lists, customer records, customer lists, customer source lists,
      proprietary computer software, and internal notes and memoranda relating to
      any
      of the foregoing. 

     

    3.2  Nondisclosure
      of Confidential Information.
      Executive will hold in a fiduciary capacity for the benefit of the Company
      all
      Confidential Information obtained by Executive during Executive’s employment
      (whether prior to or after the Agreement Date) and will use such Confidential
      Information solely within the scope of his employment with and for the exclusive
      benefit of the Company. For a period of five years after the Termination Date,
      Executive agrees (a) not to communicate, divulge or make available to any person
      or entity (other than the Company) any such Confidential Information, except
      upon the prior written authorization of the Company or as may be required by
      law
      or legal process, and (b) to deliver promptly to the Company any Confidential
      Information in his possession, including any duplicates thereof and any notes
      or
      other records Executive has prepared with respect thereto. In the event that
      the
      provisions of any applicable law or the order of any court would require
      Executive to disclose or otherwise make available any Confidential Information,
      Executive will give the Company prompt prior written notice of such required
      disclosure and an opportunity to contest the requirement of such disclosure
      or
      apply for a protective order with respect to such Confidential Information
      by
      appropriate proceedings.

     

    3.3  Injunctive
      Relief; Other Remedies.
      Executive acknowledges that a breach by Executive of Section 3.2 would cause
      immediate and irreparable harm to the Company for which an adequate monetary
      remedy does not exist; hence, Executive agrees that, in the event of a breach
      or
      threatened breach by Executive of the provisions of Section 3.2, the Company
      will be entitled to injunctive relief restraining Executive from such violation
      without the necessity of proof of actual damage or the posting of any bond,
      except as required by non waivable, applicable law. Nothing herein, however,
      will be construed as prohibiting the Company from pursuing any other remedy
      at
      law or in equity to which the Company may be entitled under applicable law
      in
      the event of a breach or threatened breach of this Agreement by Executive,
      including without limitation the recovery of damages and/or costs and expenses,
      such as reasonable attorneys’ fees, incurred by the Company as a result of any
      such breach or threatened breach. In addition to the exercise of the foregoing
      remedies, the Company will have the right upon the occurrence of any such breach
      to offset the damages of such breach as determined by the Company, against
      any
      unpaid salary, bonus, commissions or reimbursements otherwise owed to Executive.
      In particular, Executive acknowledges that the payments provided under Article
      II are conditioned upon Executive fulfilling the nondisclosure agreements
      contained in this Article 

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    III.
      If
      Executive at any time materially breaches nondisclosure agreements contained
      in
      this Article III, then the Company may offset the damages of such breach, as
      determined solely by the Company, against payments otherwise due to Executive
      under Article II or, at the Company’s option, suspend payments otherwise due to
      Executive under Article II during the period of such breach. Executive
      acknowledges that any such offset or suspension of payments would be an exercise
      of the Company’s right to offset or suspend its performance hereunder upon
      Executive’s breach of this Agreement; such offset or suspension of payments
      would not constitute, and shall not be characterized as, the imposition of
      liquidated damages. 

     

    3.4  Governing
      Law of this Article III; Consent to Jurisdiction.
      Any
      dispute regarding the reasonableness of the covenants and agreements set forth
      in this Article III or duration thereof, or the remedies available to the
      Company upon any breach of such covenants and agreements, will be governed
      by
      and interpreted in accordance with the laws of the State of the United States
      or
      other jurisdiction in which the alleged prohibited disclosure occurs, and,
      with
      respect to each such dispute, the Company and Executive each hereby consent
      to
      the jurisdiction of the state and federal courts sitting in the relevant State
      (or, in the case of any jurisdiction outside the United States, the relevant
      courts of such jurisdiction) for resolution of such dispute, and agree that
      service of process may be made upon him or it in any legal proceeding relating
      to this Article III by any means allowed under the laws of such
      jurisdiction.

     

    3.5  Executive’s
      Understanding of this Article.
      Executive hereby represents to the Company that he has read and understands,
      and
      agrees to be bound by, the terms of this Article III. Executive acknowledges
      that the duration of the covenants contained in Article III are the result
      of
      arm’s length bargaining and are fair and reasonable in light of (a) the
      importance of the functions performed by Executive and the length of time it
      would take the Company to find and train a suitable replacement, and (b)
      Executive’s level of control over and contact with the business and operations
      of the Company and its Affiliates in various jurisdictions where same are
      conducted. It is the desire and intent of the parties that the provisions of
      this Agreement be enforced to the fullest extent permitted under applicable
      law,
      whether now or hereafter in effect and, therefore, to the extent permitted
      by
      applicable law, the parties hereto waive any provision of applicable law that
      would render any provision of this Article III invalid or unenforceable.

     

    ARTICLE
      IV

    Miscellaneous

     

    4.1  Binding
      Effect; Successors.

     

    (a)  This
      Agreement shall be binding upon and inure to the benefit of the Company and
      any
      of its successors or assigns.

     

    (b)  This
      Agreement is personal to the Executive and shall not be assignable by the
      Executive without the consent of the Company (there being no obligation to
      give
      such consent) other than such rights or benefits as are transferred by will
      or
      the laws of descent and distribution.

     

    (c)  The
      Company shall require any successor to or assignee of (whether direct or
      indirect, by purchase, merger, consolidation or otherwise) all or substantially
      all of the assets 

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    or
      businesses of the Company (i) to assume unconditionally and expressly this
      Agreement and (ii) to agree to perform or to cause to be performed all of the
      obligations under this Agreement in the same manner and to the same extent
      as
      would have been required of the Company had no assignment or succession
      occurred, such assumption to be set forth in a writing reasonably satisfactory
      to the Executive. 

     

    (d)  The
      Company shall also require all entities that control or that after the
      transaction will control (directly or indirectly) the Company or any such
      successor or assignee to agree to cause to be performed all of the obligations
      under this Agreement, such agreement to be set forth in a writing reasonably
      satisfactory to the Executive.

     

    4.2  Notices.
      All
      notices hereunder must be in writing and, unless otherwise specifically provided
      herein, will be deemed to have been given upon receipt of delivery by: (a)
      hand
      (against a receipt therefor), (b) certified or registered mail, postage prepaid,
      return receipt requested, (c) a nationally recognized overnight courier service
      (against a receipt therefor) or (d) telecopy transmission with confirmation
      of
      receipt. All such notices must be addressed as follows:

     

    If
      to the
      Company, to:

    

    Stratus
      Properties Inc.

    98
      San
      Jacinto Boulevard

    Suite
      220

    Austin,
      Texas 78701

    Attention:
      Chairman of Corporate Personnel Committee

    

    If
      to the
      Executive, to:

    

    William
      H. Armstrong III

    2704
      Maria Anna

    Austin,
      Texas 78703

    

    or
      such
      other address as to which any party hereto may have notified the other in
      writing.

    

    4.3  Governing
      Law.
      Except
      as provided in Article III hereof, this Agreement shall be construed and
      enforced in accordance with and governed by the internal laws of the State
      of
      Delaware without regard to principles of conflict of laws.

     

    4.4  Withholding.
      The
      Executive agrees that the Company has the right to withhold, from the amounts
      payable pursuant to this Agreement, all amounts required to be withheld under
      applicable income and/or employment tax laws, or as otherwise stated in
      documents granting rights that are affected by this Agreement.

     

    4.5  Amendment,
      Waiver.
      No
      provision of this Agreement may be modified, amended or waived except by an
      instrument in writing signed by both parties.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    4.6  Severability.
      If any
      term or provision of this Agreement, or the application thereof to any person
      or
      circumstance, shall at any time or to any extent be invalid, illegal or
      unenforceable in any respect as written, Executive and the Company intend for
      any court construing this Agreement to modify or limit such provision so as
      to
      render it valid and enforceable to the fullest extent allowed by law. Any such
      provision that is not susceptible of such reformation shall be ignored so as
      to
      not affect any other term or provision hereof, and the remainder of this
      Agreement, or the application of such term or provision to persons or
      circumstances other than those as to which it is held invalid, illegal or
      unenforceable, shall not be affected thereby and each term and provision of
      this
      Agreement shall be valid and enforced to the fullest extent permitted by
      law.

     

    4.7  Waiver
      of Breach.
      The
      waiver by either party of a breach of any provision of this Agreement shall
      not
      operate or be construed as a waiver of any subsequent breach
      thereof.

     

    4.8  Remedies
      Not Exclusive.
      No
      remedy specified herein shall be deemed to be such party’s exclusive remedy, and
      accordingly, in addition to all of the rights and remedies provided for in
      this
      Agreement, the parties shall have all other rights and remedies provided to
      them
      by applicable law, rule or regulation.

     

    4.9  Company’s
      Reservation of Rights.
      Executive acknowledges and understands that the Executive serves at the pleasure
      of the Board and that the Company has the right at any time to terminate
      Executive’s status as an employee of the Company or any of its Affiliates, or to
      change or diminish his status during the Employment Term, subject to the rights
      of the Executive to claim the benefits conferred by this Agreement.

     

    4.10  Prior
      Change of Control Agreement.
      Effective as of the Agreement Date, this Agreement supersedes any prior change
      of control or nondisclosure agreement between the Executive and the
      Company.

     

    4.11  Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed to be an original but all of which together shall constitute one and
      the
      same instrument.

     

    4.12  Section
      409A of the Internal Revenue Code.
      In the
      event that any of the compensation or benefits payable to the Executive
      hereunder are considered to be non-qualified deferred compensation under Section
      409A of the Code and any regulations issued or to be issued by the Department
      of
      the Treasury thereunder, the Company and the Executive shall negotiate in good
      faith and agree to such amendments to this Agreement as they and their
      respective tax counsel deem necessary to avoid the imposition of additional
      taxes and penalties under Section 409A of the Code or such regulations, while
      preserving the economic benefits intended to be conferred on the Executive
      by
      this Agreement.

    
      
        
           

        

        
          15

          
            

          

        

         

      

    

    

    IN
      WITNESS WHEREOF, the Company and the Executive have caused this Agreement to
      be
      executed as of the Agreement Date.

     

    

    Stratus
      Properties Inc.

    

    By:
      /s/ James C. Leslie

    James
      C.
      Leslie

    Director
      and Chairman of the 

    Corporate
      Personnel Committee of the

    Board
      of
      Directors

    

    

    Executive

     

    /s/
      William H. Armstrong III

    William
      H. Armstrong III

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    Signature
      Page of Change of Control Agreement

    between
      Stratus Properties Inc. and William H. Armstrong III

     

    
      
         

      

      
        16Exhibit 10.2

    
      

    

    Exhibit
      10.2

    
Change
      of Control Agreement

    

    This
      Change of Control Agreement (“Agreement”) between Stratus Properties Inc., a
      Delaware corporation (the “Company”), and John E. Baker (the “Executive”) is
      dated effective as of January 26, 2007 (the “Agreement Date”).

     

    ARTICLE
      I

    Definitions

     

    1.1  Board.
“Board”
      shall mean the Board of Directors of the Company, or if after a Change of
      Control, the Post-Transaction Corporation.

     

    1.2  Cause.
“Cause”
      shall mean:

     

    (a)  The
      Executive’s willful and continued failure to perform substantially the
      Executive’s duties with the Post-Transaction Corporation or its Affiliates
      (other than any such failure resulting from incapacity due to physical or mental
      illness), after a written demand for substantial performance is delivered to
      the
      Executive by the Board, which specifically identifies the manner in which the
      Board believes that the Executive has not substantially performed the
      Executive’s duties;

     

    (b)  The
      willful engaging by the Executive in conduct that is demonstrably and materially
      injurious to the Post-Transaction Corporation or any or its Affiliates,
      monetarily or otherwise; or

     

    (c)  The
      final
      conviction of the Executive or an entering of a guilty plea or a plea of no
      contest by the Executive to a felony.

     

    For
      purposes of this provision, no act or failure to act, on the part of the
      Executive, will be considered “willful” unless it is done, or omitted to be
      done, by the Executive in bad faith or without a reasonable belief that the
      act
      or omission was in the best interest of the Post-Transaction Corporation or
      its
      Affiliates. Any act, or failure to act, based on authority given pursuant to
      a
      resolution duly adopted by the Board or the advice of counsel to the
      Post-Transaction Corporation or its Affiliates will be conclusively presumed
      to
      be done, or omitted to be done, by the Executive in good faith and in the best
      interests of the Post-Transaction Corporation or its Affiliates. The termination
      of employment of the Executive will not be deemed to be for Cause unless and
      until there has been delivered to the Executive a copy of a resolution duly
      adopted by the affirmative vote of not less than three-quarters of the entire
      membership of the Board at a meeting of the Board called and held for such
      purpose (after reasonable notice is provided to the Executive and the Executive
      is given an opportunity, together with counsel, to be heard before the Board),
      finding that, in the good faith opinion of the Board, the Executive has engaged
      in the conduct described in subparagraph (a), (b) or (c) above, and specifying
      the particulars of such conduct.

    

    1.3  Change
      of Control.
      (a)“Change
      of Control” means (capitalized terms not otherwise defined will have the
      meanings ascribed to them in paragraph (b) below):

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (i)  the
      acquisition by any Person together with all Affiliates of such Person, of
      Beneficial Ownership of the Threshold Percentage or more; provided, however,
      that for purposes of this Section 1.3(a)(i), the following will not constitute
      a
      Change of Control:

     

    (A)  any
      acquisition (other than a “Business Combination,” as defined below, that
      constitutes a Change of Control under Section 1.3(a)(iii) hereof) of Common
      Stock directly from the Company,

     

    (B)  any
      acquisition of Common Stock by the Company or its subsidiaries,

     

    (C)  any
      acquisition of Common Stock by any employee benefit plan (or related trust)
      sponsored or maintained by the Company or any corporation or other entity
      controlled by the Company, or

     

    (D)  any
      acquisition of Common Stock pursuant to a Business Combination that does not
      constitute a Change of Control under Section 1.3(a)(iii) hereof; or

     

    (ii)  individuals
      who, as of the effective date of this Agreement, constitute the Board (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 effective date of this Agreement whose election, or nomination for election
      by the Company’s shareholders, was approved by a vote of at least a majority of
      the directors then comprising the Incumbent Board will be considered a member
      of
      the Incumbent Board, unless such individual’s initial assumption of office
      occurs as a result of an actual or threatened election contest with respect
      to
      the election or removal of directors or any other actual or threatened
      solicitation of proxies or consents by or on behalf of a Person other than
      the
      Incumbent Board; or

     

    (iii)  the
      consummation of a reorganization, merger or consolidation (including a merger
      or
      consolidation of the Company or any direct or indirect subsidiary of the
      Company), or sale or other disposition of all or substantially all of the assets
      of the Company (a “Business Combination”), in each case, unless, immediately
      following such Business Combination:

     

    (A)  the
      individuals and entities who were the Beneficial Owners of the Company Voting
      Stock immediately prior to such Business Combination have direct or indirect
      Beneficial Ownership of more than 50% of the then outstanding shares of common
      stock, and more than 50% of the combined voting power of the then outstanding
      voting securities entitled to vote generally in the election of directors,
      of
      the Post-Transaction Corporation, and

     

    (B)  no
      Person
      together with all Affiliates of such Person (excluding the Post-Transaction
      Corporation and any employee benefit plan or related trust of either the
      Company, the Post-Transaction Corporation or any subsidiary of either
      corporation) Beneficially Owns 30% or more of the then outstanding shares of
      common stock of the Post-Transaction Corporation or 30% or more of the combined
      voting power of the then outstanding voting securities of the Post-Transaction
      Corporation, and

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (C)  at
      least
      a majority of the members of the board of directors of the Post-Transaction
      Corporation were members of the Incumbent Board at the time of the execution
      of
      the initial agreement, and of the action of the Board, providing for such
      Business Combination; or

     

    (iv)  approval
      by the shareholders of the Company of a complete liquidation or dissolution
      of
      the Company.

     

    (b)  As
      used
      in this Section 1.3 and elsewhere in this Agreement, the following terms have
      the meanings indicated:

     

    (i)  Affiliate:
      “Affiliate” means a Person that directly, or indirectly through one or more
      intermediaries, controls, or is controlled by, or is under common control with,
      another specified Person. 

     

    (ii)  Beneficial
      Owner: “Beneficial Owner” (and variants thereof), with respect to a security,
      means a Person who, directly or indirectly (through any contract, understanding,
      relationship or otherwise), has or shares (A) the power to vote, or direct
      the
      voting of, the security, and/or (B) the power to dispose of, or to direct the
      disposition of, the security.

     

    (iii)  Company
      Voting Stock: “Company Voting Stock” means any capital stock of the Company that
      is then entitled to vote for the election of directors.

     

    (iv)  Majority
      Shares: “Majority Shares” means the number of shares of Company Voting Stock
      that could elect a majority of the directors of the Company if all directors
      were to be elected at a single meeting.

     

    (v)  Person:
      “Person” means a natural person or entity, and will also mean the group or
      syndicate created when two or more Persons act as a syndicate or other group
      (including without limitation a partnership, limited partnership, joint venture
      or other joint undertaking) for the purpose of acquiring, holding, or disposing
      of a security, except that “Person” will not include an underwriter temporarily
      holding a security pursuant to an offering of the security.

     

    (vi)  Post-Transaction
      Corporation: Unless a Change of Control includes a Business Combination,
“Post-Transaction Corporation” means the Company after the Change of Control. If
      a Change of Control includes a Business Combination, “Post-Transaction
      Corporation” will mean the corporation or other entity resulting from the
      Business Combination unless, as a result of such Business Combination, an
      ultimate parent entity controls the Company or all or substantially all of
      the
      Company’s assets either directly or indirectly, in which case, “Post-Transaction
      Corporation” will mean such ultimate parent entity.

     

    (vii)  Threshold
      Percentage: “Threshold Percentage” means 30% of all then outstanding Company
      Voting Stock.

     

    1.4  Code.
“Code”
      shall mean the Internal Revenue Code of 1986, as amended from time to
      time.

     

    
      
         

      

      
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    1.5  Common
      Stock:
“Common
      Stock” shall mean the common stock, $0.01 par value per share, of the
      Company.

     

    1.6  Company.
      As used
      in this Agreement, “Company” shall mean the Company as defined above and any
      successor to or assignee of (whether direct or indirect, by purchase, merger,
      consolidation or otherwise) all or substantially all of the assets of the
      Company.

     

    1.7  Disability.
      “Disability” shall mean:

     

    (a)  A
      disability entitling the Executive to receive benefits under a long-term
      disability insurance policy maintained by the Post-Transaction Corporation
      or an
      Affiliate in effect at the time either because he is totally disabled or
      partially disabled, as such terms are defined in such policy in effect as of
      the
      Agreement Date or as similar terms are defined in any successor policy.

     

    (b)  If
      there
      is no long-term disability plan in effect covering the Executive, and if (i)
      a
      physical or mental illness renders the Executive incapable of satisfactorily
      discharging his duties and responsibilities to the Post-Transaction Corporation
      or an Affiliate for a period of 90 consecutive days, and (ii) such incapacity
      is
      certified in writing by a duly qualified physician chosen by the
      Post-Transaction Corporation or an Affiliate and reasonably acceptable to the
      Executive or his legal representatives, then the Board will have the power
      to
      determine that the Executive has become disabled. If the Board makes such a
      determination, the Post-Transaction Corporation or its Affiliate will have
      the
      continuing right and option, during the period that such disability continues,
      and by notice given in the manner provided in this Agreement, to terminate
      the
      status of Executive as an officer and employee. Any such termination will become
      effective 60 days after such notice of termination is given, unless within
      such
      60-day period, the Executive becomes capable of rendering services of the
      character contemplated hereby (and a physician chosen by the Post-Transaction
      Corporation or an Affiliate and reasonably acceptable to the Executive or his
      legal representatives so certifies in writing) and the Executive in fact resumes
      such services.

     

    (c)  The
      “Disability Effective Date” will mean the date on which termination of
      Executive’s status as an officer and employee becomes effective due to
      Disability.

     

    1.8  Good
      Reason.
“Good
      Reason” shall mean:

     

    (a)  Any
      failure of the Post-Transaction Corporation to provide the Executive with the
      position, authority, duties and responsibilities at least commensurate in all
      material respects with the most significant of those held, exercised and
      assigned at any time during the 120-day period immediately preceding the Change
      of Control. Executive’s position, authority, duties and responsibilities after a
      Change of Control shall not be considered commensurate in all material respects
      with Executive’s position, authority, duties and responsibilities prior to a
      Change of Control unless after the Change of Control the Executive holds an
      equivalent position in the Post-Transaction Corporation; 

     

    (b)  The
      assignment to the Executive of any duties inconsistent in any material respect
      with Executive’s position (including status, offices, titles and reporting
      requirements), authority, duties or responsibilities as contemplated by Section
      2.1(b) of this Agreement, or any 

     

    
      
         

      

      
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    other
      action that results in a diminution in such position, authority, duties or
      responsibilities, excluding for this purpose an isolated, insubstantial and
      inadvertent action not taken in bad faith that is remedied within 10 days after
      receipt of written notice thereof from the Executive to the Post-Transaction
      Corporation;

     

    (c)  Any
      failure by the Post-Transaction Corporation or its Affiliates to comply with
      any
      of the provisions of this Agreement, other than an isolated, insubstantial
      and
      inadvertent failure not occurring in bad faith that is remedied within 10 days
      after receipt of written notice thereof from the Executive to the
      Post-Transaction Corporation; or

     

    (d)  The
      Post-Transaction Corporation or its Affiliates requiring the Executive to be
      based at any office or location other than as provided in Section 2.1(b)(ii)
      hereof or requiring the Executive to travel on business to a substantially
      greater extent than required immediately prior to the Change of
      Control.

     

    For
      purposes of this Section 1.4, any determination of “Good Reason” made by the
      Executive in good faith and based upon his reasonable belief and understanding
      shall be conclusive.

    

    1.9  Termination
      Date.
      “Termination Date” shall mean, if Executive’s status as an officer and employee
      is terminated (i) by reason of Executive’s death, the date of Executive’s death,
      (ii) by reason of Disability, the Disability Effective Date, (iii) by the
      Company other than by reason of death or Disability, the date of delivery of
      the
      notice of termination or any later date specified in the notice of termination,
      which date will not be more than 30 days after the giving of the notice, or
      (iv)
      by the Executive other than by reason of death, the date of delivery of the
      notice of termination or any later date specified in the notice of termination,
      which date will not be more than 30 days after the giving of the
      notice.

     

    ARTICLE
      II

    Change
      of Control Benefit

     

    2.1  Employment
      Term and Capacity after Change of Control.
      (a)
      This
      Agreement shall commence on the Agreement Date and continue in effect through
      January 26, 2010. If the Executive continues to serve as an officer of the
      Company and a Change of Control occurs on or before January 26, 2010, then
      the
      Executive’s employment term (the “Employment Term”) shall continue through the
      later of the third anniversary of the Change of Control, subject to any earlier
      termination of Executive’s status as an officer and employee pursuant to this
      Agreement.

     

    (b)  After
      a
      Change of Control and during the Employment Term, (i) the Executive’s position
      (including status, offices, titles and reporting requirements), authority,
      duties and responsibilities shall be at least commensurate in all material
      respects with the most significant of those held, exercised and assigned at
      any
      time during the 120-day period immediately preceding the Change of Control
      and
      (ii) the Executive’s services shall be performed at the location where the
      Executive was employed immediately preceding the Change of Control or any office
      or location less than 35 miles from such location. Executive’s position,
      authority, duties and responsibilities after a Change of Control shall not
      be
      considered commensurate in all material respects with Executive’s position,
      authority, duties and 

     

    
      
         

      

      
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    responsibilities
      prior to a Change of Control unless after the Change of Control the Executive
      holds an equivalent position in the Post-Transaction Corporation. 

     

    2.2  Compensation
      and Benefits.
      During
      the Employment Term, the Executive shall be entitled to the following
      compensation and benefits: 

     

    (a)  Salary.
      An
      annual salary (“Base Salary”) at the highest rate in effect for the Executive at
      any time during the 120-day period immediately preceding the Change of Control,
      payable to the Executive at such intervals no less frequent than the most
      frequent intervals in effect at any time during the 120-day period immediately
      preceding the Change of Control or, if more favorable to the Executive, the
      intervals in effect at any time after the Change of Control for other most
      senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    (b)  Bonus.
      Executive shall be entitled to participate in an annual incentive bonus program
      applicable to other most senior executives of the Post-Transaction Corporation
      and its Affiliates but in no event shall such program provide the Executive
      with
      incentive opportunities less favorable than the most favorable of those provided
      by the Company and its Affiliates for the Executive under the Company’s annual
      cash plan as in effect for Executive at any time during the 120-day period
      immediately preceding the Change of Control or, if more favorable to the
      Executive, those provided generally at any time after the Change of Control
      to
      other most senior executives of the Post-Transaction Corporation and its
      Affiliates. Any such bonus shall be paid in cash no later than 90 days following
      the close of the fiscal year for which it is earned.

     

    (c)  Fringe
      Benefits.
      The
      Executive shall be entitled to fringe benefits (including, but not limited
      to,
      automobile allowance, air travel, and reimbursement for club membership dues)
      in
      accordance with the most favorable agreements, plans, practices, programs and
      policies of the Company and its Affiliates in effect for the Executive at any
      time during the 120-day period immediately preceding the Change of Control
      or,
      if more favorable to the Executive, as in effect generally at any time
      thereafter with respect to other most senior executives of the Post-Transaction
      Corporation and its Affiliates.

     

    (d)  Expenses.
      The
      Executive shall be entitled to receive prompt reimbursement for all reasonable
      business expenses (including food and lodging) incurred by the Executive in
      accordance with the most favorable agreements, policies, practices and
      procedures of the Company and its Affiliates in effect for the Executive at
      any
      time during the 120-day period immediately preceding the Change of Control
      or,
      if more favorable to the Executive, as in effect generally at any time
      thereafter with respect to other most senior executives of the Post-Transaction
      Corporation and its Affiliates.

     

    (e)  Incentive,
      Savings and Retirement Plans.
      The
      Executive shall be entitled to participate in all incentive, savings and
      retirement plans, practices, policies and programs applicable generally to
      other
      most senior executives of the Post-Transaction Corporation and its Affiliates,
      but in no event shall such plans, practices, policies and programs provide
      the
      Executive with incentive opportunities (measured with respect to both regular
      and special incentive opportunities, to the extent, if any, that such
      distinction is applicable), savings 

     

    
      
         

      

      
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    opportunities
      and retirement benefit opportunities, in each case, less favorable than the
      most
      favorable of those provided by the Company and its Affiliates for the Executive
      under any agreements, plans, practices, policies and programs as in effect
      at
      any time during the 120-day period immediately preceding the Change of
      Control.

     

    (f)  Welfare
      Benefit Plans.
      The
      Executive and the Executive’s family shall be eligible for participation in and
      shall receive all benefits under welfare benefit plans, practices, policies
      and
      programs provided by the Post-Transaction Corporation and its Affiliates
      (including, without limitation, medical, prescription, dental, disability,
      employee life, group life, accidental death and travel accident insurance plans
      and programs) to the extent applicable generally to other most senior executives
      of the Post-Transaction Corporation and its Affiliates, but in no event shall
      such plans, practices, policies and programs provide the Executive with
      benefits, in each case, less favorable than the most favorable of any
      agreements, plans, practices, policies and programs of the Company and its
      Affiliates in effect for the Executive at any time during the 120-day period
      immediately preceding the Change of Control.

     

    (g)  Indemnification
      and Insurance.
      The
      Post-Transaction Corporation shall indemnify the Executive, to the fullest
      extent permitted by applicable law, for any and all claims brought against
      him
      arising out his services during or prior to the Employment Term. In addition,
      the Post-Transaction Corporation shall maintain a directors’ and officers’
insurance policy covering the Executive substantially in the form of the policy
      maintained by the Company and its Affiliates at any time during the 120-day
      period immediately preceding the Change of Control or, if more favorable to
      the
      Executive, as provided generally at any time thereafter with respect to other
      most senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    (h)  Office
      and Support Staff.
      The
      Executive shall be entitled to an office or offices of a size and with
      furnishings and other appointments, and to exclusive personal secretarial and
      other assistance, at least equal to the most favorable of the foregoing provided
      to the Executive by the Company and its Affiliates at any time during the
      120-day period immediately preceding the Change of Control or, if more favorable
      to the Executive, as provided generally at any time thereafter with respect
      to
      other most senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    (i)  Vacation.
      The
      Executive shall be entitled to paid vacation in accordance with the most
      favorable agreements, plans, policies, programs and practices of the Company
      and
      its Affiliates as in effect for the Executive at any time during the 120-day
      period immediately preceding the Change of Control or, if more favorable to
      the
      Executive, as in effect generally at any time thereafter with respect to other
      most senior executives of the Post-Transaction Corporation and its
      Affiliates.

     

    2.3  Obligations
      upon Termination after a Change of Control.

     

    (a)  Termination
      as a Result of Death, Disability or Retirement.
      If,
      after a Change of Control and during the Employment Term, (1) the Executive’s
      status as an officer and employee is terminated by reason of the Executive’s
      death, (2) the Post-Transaction Corporation terminates the Executive’s status as
      an officer and employee by reason of Executive’s Disability, 

     

    
      
         

      

      
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    or
      (3)
      the Executive retires and terminates his status as an officer and employee,
      then, subject to Section 2.3(f):

     

    (i)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive or his
      legal representatives the Executive’s Base Salary earned through the Termination
      Date to the extent not previously paid (the “Accrued Salary”); 

     

    (ii)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive or his
      legal representatives a pro rata bonus in an amount determined by calculating
      the average of the annual bonus received by the Executive in the three most
      recently completed fiscal years prior to the Termination Date, then multiplying
      such bonus amount by the fraction obtained by dividing the number of days in
      the
      year through the Termination Date by 365 (the “Pro Rata Bonus”), subject to any
      requirement under Section 409A of the Code that such payment be delayed for
      six
      months following termination of employment; and

     

    (iii)  The
      Post-Transaction Corporation or an Affiliate will pay or deliver, as
      appropriate, all other benefits earned by the Executive or accrued for his
      benefit pursuant to any employee benefit plans maintained by the
      Post-Transaction Corporation or its Affiliates with respect to services rendered
      by the Executive prior to the Termination Date.

     

    (b)  Termination
      by Company for Cause; by Executive for other than Good Reason.
      If,
      after a Change of Control and during the Employment Term, the Executive’s status
      as an officer and employee is terminated by the Post-Transaction Corporation
      or
      an Affiliate for Cause, or by the Executive for other than Good Reason, the
      Post-Transaction Corporation or Affiliate will pay to the Executive the Accrued
      Salary without further obligation to the Executive other than for obligations
      by
      law and obligations for any benefits earned by the Executive or accrued for
      his
      benefit pursuant to any employee benefit plans maintained by the
      Post-Transaction Corporation or Affiliate with respect to services rendered
      by
      the Executive prior to the Termination Date.

     

    (c)  Termination
      by Company for Reasons other than Death, Disability or Cause; by Executive
      under
      Certain Circumstances.
      If,
      after a Change of Control and during the Employment Term, (1) the
      Post-Transaction Corporation or an Affiliate terminates the Executive’s status
      as an officer and employee other than for Cause, death or Disability, or (2)
      the
      Executive terminates his status as an officer and employee for Good Reason,
      then, subject to Section 2.3(f) hereof:

     

    (i)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive the
      Accrued Salary; 

     

    (ii)  The
      Post-Transaction Corporation or an Affiliate will pay to the Executive in a
      lump
      sum in cash on the first business day that is more than six months after the
      Termination Date (A) the Pro Rata Bonus, and (B) an amount equal to 2.99 times
      the sum of (x) the Executive’s Base Salary in effect at the Termination Date and
      (y) the highest annual bonus awarded to the Executive during the three fiscal
      years immediately preceding the Termination Date (excluding any payments for
      long-term incentives); 

     

    
      
         

      

      
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    (iii)  For
      the
      period commencing on the Termination Date and ending on the earlier of (A)
      December 31st
      of the
      first calendar year following the calendar year in which the Termination Date
      occurs, or (B) the date that the Executive accepts new employment (the
“Continuation Period”), the Post-Transaction Corporation or an Affiliate will at
      its expense maintain and administer for the continued benefit of Executive
      all
      insurance and welfare benefit plans in which Executive was entitled to
      participate as an employee as of the Termination Date; provided that Executive’s
      continued participation is possible under the general terms and provisions
      of
      such plans and all applicable laws. The coverage and benefits (including
      deductibles and costs) provided under any such benefit plan in accordance with
      this paragraph during the Continuation Period will be no less favorable to
      Executive than the most favorable of such coverages and benefits as of the
      Termination Date; provided, however, in the event of the Disability of Executive
      during the Continuation Period, benefits will, to the maximum extent possible,
      not be paid for the Continuation Period but will instead commence immediately
      following the end of the Continuation Period. If Executive’s participation in
      any such benefit plan is barred or any such benefit plan is terminated, the
      Post-Transaction Corporation or its Affiliate will provide Executive with
      benefits substantially similar or comparable in value to those Executive would
      otherwise have been entitled to receive under such plans. The Executive
      acknowledges that if medical expenses are incurred during the Continuation
      Period but reimbursed after the end of the second calendar year following the
      calendar year in which the Termination Date occurs, then the Executive may
      be
      subject to taxes, penalties and interest under Section 409A of the Code. The
      Executive agrees to submit (or cause healthcare providers to submit) for payment
      or reimbursement all medical expenses covered under applicable plans that are
      incurred during the Continuation Period no later than July 1st
      of the
      second calendar year following the calendar year in which the Termination Date
      occurs, and the Post-Transaction Corporation or its Affiliate shall cause such
      covered medical expenses to be reimbursed by December 31st
      of such
      year. At the end of the Continuation Period, the Executive will have the option
      to have assigned to him, at no cost and with no apportionment of prepaid
      premiums, any assignable insurance owned by the Post-Transaction Corporation
      or
      its Affiliate that relates specifically to the Executive. To the maximum extent
      permitted by law, the Executive will be eligible for coverage under COBRA at
      the
      end of the Continuation Period or earlier cessation of the Post-Transaction
      Corporation’s obligation under the foregoing provisions of this paragraph;

     

    (iv)  All
      benefits that the Executive is entitled to receive pursuant to benefit plans
      maintained by the Post-Transaction Corporation or an Affiliate under which
      benefits are calculated based upon years of service or age will be calculated
      by
      treating the Executive as having attained two additional years of age and as
      having provided two additional years of service as of the Termination Date;
      and

     

    (v)  The
      Post-Transaction Corporation or an Affiliate will pay or deliver, as
      appropriate, all other benefits earned by the Executive or accrued for his
      benefit pursuant to any employee benefit plans maintained by the
      Post-Transaction Corporation or Affiliate with respect to services rendered
      by
      the Executive prior to the Termination Date.

     

    (d)  No
      Acceleration of Payments.
      No
      acceleration of payments and benefits provided herein shall be permitted, except
      that the Post-Transaction Corporation may accelerate payment, if permitted
      under
      the regulations under Section 409A of the Code, as necessary to allow the
      Executive to pay FICA taxes on amounts payable hereunder and additional taxes
      

     

    
      
         

      

      
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    resulting
      from the payment of such FICA amount or as necessary to pay taxes and penalties
      arising as a result of the payments provided for in this Agreement failing
      to
      meet the requirements of Section 409A of the Code.

     

    (e)  Resignation
      from Board of Directors.
      If the
      Executive is a director of the Post-Transaction Corporation or any of its
      Affiliates and his status as an officer and employee is terminated for any
      reason other than death, the Executive will, if requested by the
      Post-Transaction Corporation, immediately resign as a director of the
      Post-Transaction Corporation and its Affiliates. If such resignation is not
      received within 20 business days after the Executive actually receives written
      notice from the Post-Transaction Corporation requesting the resignation, the
      Executive will forfeit any right to receive any payments pursuant to this
      Agreement.

     

    (f)  Nondisclosure
      and Proprietary Rights.
      The
      rights and obligations of the Company and the Executive contained in Article
      III
      hereof will continue to apply notwithstanding a termination following a Change
      of Control.

     

    (g)  Most
      Favorable Benefits.
      It is
      the intention of the parties that the terms of this Agreement provide payments
      and benefits to the Executive that are equivalent or more beneficial to the
      Executive than are otherwise available to the Executive under the terms of
      any
      applicable benefit plan or related compensation agreement. To that end, the
      terms of the Agreement shall govern the payments and benefits to which the
      Executive shall be entitled upon the termination of the Executive’s status as an
      officer and employee as provided herein, except that if the terms of any
      applicable benefit plan or related compensation agreement provide more favorable
      benefits to the Executive than are provided hereunder, the terms of such plan
      or
      agreement shall control. 

     

    2.4  Excise
      Tax Provision.
      

     

    (a)  Notwithstanding
      any other provisions of this Agreement, if a Change of Control occurs during
      the
      original or extended term of this Agreement, in the event that any payment
      or
      benefit received or to be received by the Executive in connection with the
      Change of Control of the Company or the termination of the Executive’s
      employment under this Agreement or any other agreement between the Company
      and
      the Executive (all such payments and benefits, including the payments and
      benefits under Section 2.3(c) hereof, being hereinafter called “Total Payments”)
      would be subject (in whole or in part), to an excise tax imposed by section
      4999
      of the Code (the “Excise Tax”), then the cash payments under Section 2.3(c)
      hereof shall first be reduced, and the noncash payments and benefits under
      the
      other sections hereof shall thereafter be reduced, to the extent necessary
      so
      that no portion of the Total Payments is subject to the Excise Tax but only
      if
      (A) the net amount of such Total Payments, as so reduced (and after subtracting
      the net amount of federal, state and local income and employment taxes on such
      reduced Total Payments) is greater than or equal to (B) the net amount of such
      Total Payments without such reduction (but after subtracting the net amount
      of
      federal, state and local income and employment taxes on such Total Payments
      and
      the amount of Excise Tax to which the Employee would be subject in respect
      of
      such unreduced Total Payments); provided, however, that the Executive may elect
      to have the noncash payments and benefits hereof reduced (or eliminated) prior
      to any reduction of the cash payments under Section 2.3(c) hereof.

     

    
      
         

      

      
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    (b)  For
      purposes of determining whether and the extent to which the Total Payments
      will
      be subject to the Excise Tax, (i) no portion of the Total Payments the receipt
      or enjoyment of which the Executive shall have waived at such time and in such
      manner as not to constitute a “payment” within the meaning of section 280G(b) of
      the Code shall be taken into account, (ii) no portion of the Total Payments
      shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”)
      reasonably acceptable to the Executive and selected by the accounting firm
      (the
“Auditor”) which was, immediately prior to a Change of Control or other event
      giving rise to a potential Excise Tax, the Company’s independent auditor, does
      not constitute a “parachute payment” within the meaning of section 280G(b)(2) of
      the Code (including by reason of section 280G(b)(4)(A) of the Code) and, in
      calculating the Excise Tax, no portion of such Total Payments shall be taken
      into account which, in the opinion of Tax Counsel, constitutes reasonable
      compensation for services actually rendered, within the meaning of section
      280G(b)(4)(B) of the Code, in excess of the “Base Amount” (within the meaning
      set forth in section 280G(b)(3) of the Code) allocable to such reasonable
      compensation, and (iii) the value of any non-cash benefit or any deferred
      payment or benefit included in the Total Payments shall be determined by the
      Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
      the
      Code.

     

    (c)  At
      the
      time that payments are made under this Agreement, the Post-Transaction
      Corporation shall provide the Executive with a written statement setting forth
      the manner in which such payments were calculated and the basis for such
      calculations including, without limitation, any opinions or other advice the
      Post-Transaction Corporation has received from Tax Counsel, the Auditor or
      other
      advisors or consultants (and any such opinions or advice which are in writing
      shall be attached to the statement).

     

    2.5  Stock
      Options; Restricted Stock Units.
      The
      foregoing benefits are intended to be in addition to the value of any options
      to
      acquire Common Stock of the Company, the exercisability of which is accelerated
      pursuant to the terms of any stock option agreement, any restricted stock units
      the vesting of which is accelerated pursuant to the terms of the restricted
      stock unit agreement, and any other incentive or similar plan heretofore or
      hereafter adopted by the Company.

     

    2.6  Legal
      Fees.
      The
      Company agrees to pay as incurred all legal fees and expenses that the Executive
      may reasonably incur as a result of any contest (regardless of the outcome
      thereof) by the Company, the Executive or others of the validity or
      enforceability of, or liability under, any provision of this Agreement
      (including as a result of any contest by the Executive about the amount or
      timing of any payment pursuant to this Agreement).

     

    ARTICLE
      III

    Nondisclosure
      and Proprietary Rights

     

    3.1  Confidential
      Information.
      For
      purposes of this Agreement, the term “Confidential Information” means any
      information, knowledge or data of any nature and in any form (including
      information that is electronically transmitted or stored on any form of magnetic
      or electronic storage media) relating to the past, current or prospective
      business or operations of the Company and its Affiliates, that at the time
      or
      times concerned is not generally known to persons engaged in businesses similar
      to those conducted or contemplated by the Company and 

     

    
      
         

      

      
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    its
      Affiliates (other than information known by such persons through a violation
      of
      an obligation of confidentiality to the Company), whether produced by the
      Company and its Affiliates or any of their consultants, agents or independent
      contractors or by Executive, and whether or not marked confidential, including
      without limitation information relating to the Company’s or its Affiliates’
products and services, business plans, business acquisitions, processes, product
      or service research and development ideas, methods or techniques, training
      methods and materials, and other operational methods or techniques, quality
      assurance procedures or standards, operating procedures, files, plans,
      specifications, proposals, drawings, charts, graphs, support data, trade
      secrets, supplier lists, supplier information, purchasing methods or practices,
      distribution and selling activities, consultants’ reports, marketing and
      engineering or other technical studies, maintenance records, employment or
      personnel data, marketing data, strategies or techniques, financial reports,
      budgets, projections, cost analyses, price lists, formulae and analyses,
      employee lists, customer records, customer lists, customer source lists,
      proprietary computer software, and internal notes and memoranda relating to
      any
      of the foregoing. 

     

    3.2  Nondisclosure
      of Confidential Information.
      Executive will hold in a fiduciary capacity for the benefit of the Company
      all
      Confidential Information obtained by Executive during Executive’s employment
      (whether prior to or after the Agreement Date) and will use such Confidential
      Information solely within the scope of his employment with and for the exclusive
      benefit of the Company. For a period of five years after the Termination Date,
      Executive agrees (a) not to communicate, divulge or make available to any person
      or entity (other than the Company) any such Confidential Information, except
      upon the prior written authorization of the Company or as may be required by
      law
      or legal process, and (b) to deliver promptly to the Company any Confidential
      Information in his possession, including any duplicates thereof and any notes
      or
      other records Executive has prepared with respect thereto. In the event that
      the
      provisions of any applicable law or the order of any court would require
      Executive to disclose or otherwise make available any Confidential Information,
      Executive will give the Company prompt prior written notice of such required
      disclosure and an opportunity to contest the requirement of such disclosure
      or
      apply for a protective order with respect to such Confidential Information
      by
      appropriate proceedings.

     

    3.3  Injunctive
      Relief; Other Remedies.
      Executive acknowledges that a breach by Executive of Section 3.2 would cause
      immediate and irreparable harm to the Company for which an adequate monetary
      remedy does not exist; hence, Executive agrees that, in the event of a breach
      or
      threatened breach by Executive of the provisions of Section 3.2, the Company
      will be entitled to injunctive relief restraining Executive from such violation
      without the necessity of proof of actual damage or the posting of any bond,
      except as required by non waivable, applicable law. Nothing herein, however,
      will be construed as prohibiting the Company from pursuing any other remedy
      at
      law or in equity to which the Company may be entitled under applicable law
      in
      the event of a breach or threatened breach of this Agreement by Executive,
      including without limitation the recovery of damages and/or costs and expenses,
      such as reasonable attorneys’ fees, incurred by the Company as a result of any
      such breach or threatened breach. In addition to the exercise of the foregoing
      remedies, the Company will have the right upon the occurrence of any such breach
      to offset the damages of such breach as determined by the Company, against
      any
      unpaid salary, bonus, commissions or reimbursements otherwise owed to Executive.
      In particular, Executive acknowledges that the payments provided under Article
      II are conditioned upon Executive fulfilling the nondisclosure agreements
      contained in this Article 

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    III.
      If
      Executive at any time materially breaches nondisclosure agreements contained
      in
      this Article III, then the Company may offset the damages of such breach, as
      determined solely by the Company, against payments otherwise due to Executive
      under Article II or, at the Company’s option, suspend payments otherwise due to
      Executive under Article II during the period of such breach. Executive
      acknowledges that any such offset or suspension of payments would be an exercise
      of the Company’s right to offset or suspend its performance hereunder upon
      Executive’s breach of this Agreement; such offset or suspension of payments
      would not constitute, and shall not be characterized as, the imposition of
      liquidated damages. 

     

    3.4  Governing
      Law of this Article III; Consent to Jurisdiction.
      Any
      dispute regarding the reasonableness of the covenants and agreements set forth
      in this Article III or duration thereof, or the remedies available to the
      Company upon any breach of such covenants and agreements, will be governed
      by
      and interpreted in accordance with the laws of the State of the United States
      or
      other jurisdiction in which the alleged prohibited disclosure occurs, and,
      with
      respect to each such dispute, the Company and Executive each hereby consent
      to
      the jurisdiction of the state and federal courts sitting in the relevant State
      (or, in the case of any jurisdiction outside the United States, the relevant
      courts of such jurisdiction) for resolution of such dispute, and agree that
      service of process may be made upon him or it in any legal proceeding relating
      to this Article III by any means allowed under the laws of such
      jurisdiction.

     

    3.5  Executive’s
      Understanding of this Article.
      Executive hereby represents to the Company that he has read and understands,
      and
      agrees to be bound by, the terms of this Article III. Executive acknowledges
      that the duration of the covenants contained in Article III are the result
      of
      arm’s length bargaining and are fair and reasonable in light of (a) the
      importance of the functions performed by Executive and the length of time it
      would take the Company to find and train a suitable replacement, and (b)
      Executive’s level of control over and contact with the business and operations
      of the Company and its Affiliates in various jurisdictions where same are
      conducted. It is the desire and intent of the parties that the provisions of
      this Agreement be enforced to the fullest extent permitted under applicable
      law,
      whether now or hereafter in effect and, therefore, to the extent permitted
      by
      applicable law, the parties hereto waive any provision of applicable law that
      would render any provision of this Article III invalid or unenforceable.

     

    ARTICLE
      IV

    Miscellaneous

     

    4.1  Binding
      Effect; Successors.

     

    (a)  This
      Agreement shall be binding upon and inure to the benefit of the Company and
      any
      of its successors or assigns.

     

    (b)  This
      Agreement is personal to the Executive and shall not be assignable by the
      Executive without the consent of the Company (there being no obligation to
      give
      such consent) other than such rights or benefits as are transferred by will
      or
      the laws of descent and distribution.

     

    (c)  The
      Company shall require any successor to or assignee of (whether direct or
      indirect, by purchase, merger, consolidation or otherwise) all or substantially
      all of the assets 

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    or
      businesses of the Company (i) to assume unconditionally and expressly this
      Agreement and (ii) to agree to perform or to cause to be performed all of the
      obligations under this Agreement in the same manner and to the same extent
      as
      would have been required of the Company had no assignment or succession
      occurred, such assumption to be set forth in a writing reasonably satisfactory
      to the Executive. 

     

    (d)  The
      Company shall also require all entities that control or that after the
      transaction will control (directly or indirectly) the Company or any such
      successor or assignee to agree to cause to be performed all of the obligations
      under this Agreement, such agreement to be set forth in a writing reasonably
      satisfactory to the Executive.

     

    4.2  Notices.
      All
      notices hereunder must be in writing and, unless otherwise specifically provided
      herein, will be deemed to have been given upon receipt of delivery by: (a)
      hand
      (against a receipt therefor), (b) certified or registered mail, postage prepaid,
      return receipt requested, (c) a nationally recognized overnight courier service
      (against a receipt therefor) or (d) telecopy transmission with confirmation
      of
      receipt. All such notices must be addressed as follows:

     

    If
      to the
      Company, to:

    

    Stratus
      Properties Inc.

    98
      San
      Jacinto Boulevard

    Suite
      220

    Austin,
      Texas 78701

    Attention:
      Chairman of Corporate Personnel Committee

    

    If
      to the
      Executive, to:

    

    John
      E.
      Baker

    P.O.
      Box
      1195

    Elgin,
      Texas 78621

    

    or
      such
      other address as to which any party hereto may have notified the other in
      writing.

    

    4.3  Governing
      Law.
      Except
      as provided in Article III hereof, this Agreement shall be construed and
      enforced in accordance with and governed by the internal laws of the State
      of
      Delaware without regard to principles of conflict of laws.

     

    4.4  Withholding.
      The
      Executive agrees that the Company has the right to withhold, from the amounts
      payable pursuant to this Agreement, all amounts required to be withheld under
      applicable income and/or employment tax laws, or as otherwise stated in
      documents granting rights that are affected by this Agreement.

     

    4.5  Amendment,
      Waiver.
      No
      provision of this Agreement may be modified, amended or waived except by an
      instrument in writing signed by both parties.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    4.6  Severability.
      If any
      term or provision of this Agreement, or the application thereof to any person
      or
      circumstance, shall at any time or to any extent be invalid, illegal or
      unenforceable in any respect as written, Executive and the Company intend for
      any court construing this Agreement to modify or limit such provision so as
      to
      render it valid and enforceable to the fullest extent allowed by law. Any such
      provision that is not susceptible of such reformation shall be ignored so as
      to
      not affect any other term or provision hereof, and the remainder of this
      Agreement, or the application of such term or provision to persons or
      circumstances other than those as to which it is held invalid, illegal or
      unenforceable, shall not be affected thereby and each term and provision of
      this
      Agreement shall be valid and enforced to the fullest extent permitted by
      law.

     

    4.7  Waiver
      of Breach.
      The
      waiver by either party of a breach of any provision of this Agreement shall
      not
      operate or be construed as a waiver of any subsequent breach
      thereof.

     

    4.8  Remedies
      Not Exclusive.
      No
      remedy specified herein shall be deemed to be such party’s exclusive remedy, and
      accordingly, in addition to all of the rights and remedies provided for in
      this
      Agreement, the parties shall have all other rights and remedies provided to
      them
      by applicable law, rule or regulation.

     

    4.9  Company’s
      Reservation of Rights.
      Executive acknowledges and understands that the Executive serves at the pleasure
      of the Board and that the Company has the right at any time to terminate
      Executive’s status as an employee of the Company or any of its Affiliates, or to
      change or diminish his status during the Employment Term, subject to the rights
      of the Executive to claim the benefits conferred by this Agreement.

     

    4.10  Prior
      Change of Control Agreement.
      Effective as of the Agreement Date, this Agreement supersedes any prior change
      of control or nondisclosure agreement between the Executive and the
      Company.

     

    4.11  Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed to be an original but all of which together shall constitute one and
      the
      same instrument.

     

    4.12  Section
      409A of the Internal Revenue Code.
      In the
      event that any of the compensation or benefits payable to the Executive
      hereunder are considered to be non-qualified deferred compensation under Section
      409A of the Code and any regulations issued or to be issued by the Department
      of
      the Treasury thereunder, the Company and the Executive shall negotiate in good
      faith and agree to such amendments to this Agreement as they and their
      respective tax counsel deem necessary to avoid the imposition of additional
      taxes and penalties under Section 409A of the Code or such regulations, while
      preserving the economic benefits intended to be conferred on the Executive
      by
      this Agreement.

     

    
      
         

         

      

      
        15

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Company and the Executive have caused this Agreement to
      be
      executed as of the Agreement Date.

     

    

    Stratus
      Properties Inc.

    

    

    

    By:
      /s/ James C. Leslie

    James
      C.
      Leslie

    Director
      and Chairman of the 

    Corporate
      Personnel Committee of the

    Board
      of
      Directors

    

    

    Executive

     

     

    /s/
      John E. Baker

    John
      E.
      Baker

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    Signature
      Page of Change of Control Agreement

    between
      Stratus Properties Inc. and John E. Baker

     

    
      
         

      

      
        16

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