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GUARANTY
THIS GUARANTY (this “Guaranty”) is executed to be effective as of June 2, 2021, by STRATUS PROPERTIES INC., a Delaware corporation (the “Guarantor”) for the benefit of TEXAS CAPITAL BANK, NATIONAL ASSOCIATION, a national banking association, as Administrative Agent for the Lenders described in the Loan Agreement (together with its successors and assigns, being hereinafter referred to as “Agent”).  
RECITALS
A.Borrower may, from time to time, be indebted to Agent and Lenders pursuant to that certain Loan Agreement of even date herewith (as modified, amended, renewed, extended, and restated from time to time, the “Loan Agreement”), executed by and among Borrower, Agent and the Lenders described therein. 
B.The execution and delivery of this Guaranty is a condition precedent to the obligations of Agent and the Lenders to make loans or extend credit under the Loan Agreement and is an integral part of the transactions contemplated thereby.
C.Guarantor is the beneficial owner of a direct or indirect interest in Borrower and is an Affiliate of Borrower.  The value of the consideration and benefit received and to be received by Guarantor, directly or indirectly, as a result of the extension of credit by Agent and Lenders to Borrower is a substantial and direct benefit to Guarantor.
AGREEMENT:
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby guarantees to Agent the prompt payment and performance of the Guaranteed Obligations, this Guaranty being upon the following terms and conditions:
1.Definitions.  All capitalized terms used in this Guaranty and not otherwise defined herein shall have the same meanings as given them in the Loan Agreement.  As used in this Guaranty, the following terms have the following meanings:
“Affiliate” means when used with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by, or is under common Control with that Person.
“Borrower” means The Saint June, L.P., a Texas limited partnership, and without limitation, Borrower’s successors and assigns (regardless of whether such successor or assign is formed by or results from any merger, consolidation, conversion, sale or transfer of assets, reorganization, or otherwise) including Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of its assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Laws from time to time in effect.
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“Carveout Obligations” means any losses, damages, costs, Expenses, liabilities, and any other obligations suffered or incurred by Agent or any of the Lenders (including attorneys’ fees and expenses), in connection with or resulting from any of the following: 
(a)Any rents, issues or profits of the Property which are collected by or on behalf of the Borrower during an Event of Default and which are not applied to the normal operating expenses of the Property and any amounts due to Agent under the Loan Documents.
(b)The failure to pay any of the Impositions. 
(c)Any intentional or grossly negligent waste on the Property committed by Borrower, Guarantor or any of their respective Affiliates.
(d)Any willful misconduct by Borrower, Guarantor or any of their respective Affiliates in violation of the Loan Documents (including interference with the exercise of remedies by Agent or any of the Lenders during the continuance of an Event of Default but excluding the failure to pay the Indebtedness; provided, however, that the good faith assertion of rights or defenses not otherwise waived in the Loan Documents by any such Person during the continuance of an Event of Default shall not constitute willful misconduct). 
(e)Insurance and/or condemnation proceeds which are received by or on behalf of the Borrower and which are not delivered to the Agent or otherwise applied as required by the Loan Documents. 
(f)Failure to keep the Property insured as required by the Loan Documents.  
(g)The commission of any criminal act, fraud or intentional misrepresentation by Borrower, Guarantor or any of their respective Affiliates in connection with the Loan.
(h)Any fees or commissions paid by Borrower to any Affiliate in violation of the terms of the Loan Documents. 
(i)The failure to pay expenses, charges or other liabilities that create liens on any portion of the Property to the extent such liens are not bonded over or discharged in accordance with the Loan Documents so that such liens are not encumbrances to the title of the Property.
(j)Upon foreclosure of the lien of the Loan Documents, the failure of the Borrower or any Affiliate of Borrower to deliver or surrender to the purchaser of the Property any real and personal property covered by any of the Loan Documents. 
(k)Any amount owed to Agent or to Lenders pursuant to the Environmental Indemnity Agreement. 
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(l)Any breach by Borrower under or early termination of any Hedge Agreement entered into between Borrower and Agent or any Lenders (or any of their respective Affiliates), if any.
(m)Failure to maintain any accounts with Agent, to the extent required by the Loan Documents.
(n)Failure to pay to Agent all unearned advance rentals, security deposits or similar monetary deposits that have been paid by tenants of the Property (i) to the extent that such funds have not been refunded to such tenants, and (ii) to the extent payment to Agent is required under the Loan Documents. 
(o)Any damages, costs and expenses arising from, or in connection with, Borrower’s failure to pay any amount resulting in a lien pursuant to Section 61 of the Texas Labor Code. 
It being intended hereby that the Guarantor shall be personally liable and obligated to the full extent of each and all of the amounts described in the subsections of this paragraph and that the Agent shall not be limited in any way in enforcing such personal liability and obligation of the Guarantor.
“Cash Equivalents” means (a) cash, currency, or a credit balance in a demand, time, savings, passbook, or like account with Agent or a federal or state insured bank located in the United States, and (b) certificates of deposit that are issued by, and held at, Agent or a federal or state insured bank located in the United States and mature within 60 days from the date of issuance thereof.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).
“Completion Obligations” means all of the Obligations of Borrower to achieve Completion on or before the Completion Date in accordance with the Loan Agreement and to pay all costs and expenses in connection therewith, including without limitation, the obligation to make any required “Completion Deposit” under the Loan Agreement and the obligation to fund any cost overruns if the Borrower’s equity plus the proceeds of the Loan allocated to achieve Completion are insufficient to achieve Completion on or before the Completion Date.  
“Eligible Government Securities” means obligations: (a) which are (i) issued or guaranteed by the United States of America or any instrumentality thereof, (ii) regularly traded on a Public Market and are not subject to any suspension, revocations, or halting of its trading privileges, and (iii) not subject to any federal or state securities laws or other laws which restrict or limit their sale or transfer; (b) whose issuer is in compliance with all reporting requirements under the Commodity Exchange Act and any rules promulgated by the relevant exchange; and (c) whose issuer is not subject to a Regulatory Event. 
“Eligible Securities” means common stock equity securities: (a) which are (i) regularly traded on a Public Market, (ii) freely sold by or for the account of Borrower and Agent without any restrictions under Rule 144 of the Securities Act of 1933, as amended, (iii) registered and freely saleable shares, (iv) were issued by an issuer that is compliance with all reporting 
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requirements under the Commodity Exchange Act and any rules promulgated by the relevant exchange, (v) not issued or maintained by a hedge fund, and (vi) maintained in non-retirement accounts; (b) whose issuer’s trading privileges on the relevant exchange are not revoked, suspended or otherwise halted; and (c) whose issuer is not subject to a Regulatory Event.
“Environmental Indemnity Agreement” means that certain Environmental Indemnity Agreement dated of even date hereof executed by Borrower and Guarantor in favor of Agent, on behalf of Lenders.
“Excluded Rate Contract Obligation” means, with respect to Guarantor, any guarantee of any Swap Obligation under a Secured Rate Contract if, and only to the extent that and for so long as, all or a portion of the guarantee of Guarantor of such Swap Obligation under a Secured Rate Contract (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of Guarantor's failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the guarantee of Guarantor becomes effective with respect to such Swap Obligation under a Secured Rate Contract.  If a Swap Obligation under a Secured Rate Contract arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation under a Secured Rate Contract that is attributable to swaps for which such guarantee becomes illegal.
“Expenses”  means (a) all costs and expenses of Agent or any of the Lenders in connection with any default and the enforcement of this Guaranty or any other Loan Document, including, without limitation, the fees and expenses of their respective legal counsel, advisors, consultants, and auditors, (b) all transfer, stamp, documentary, or other similar taxes, assessments, or charges levied by any Governmental Authority in respect of this Guaranty or any of the other Loan Documents, and (c) all other out of pocket costs and expenses incurred by Agent or any of the Lenders in connection with this Guaranty or any other Loan Document, including without limitation, any out of pocket costs and expenses incurred in servicing or administering the Loan (including costs or expenses related to any amendments or modifications), any litigation, dispute, suit, proceeding, or action; the enforcement of its rights and remedies, and the protection of its interests in bankruptcy, insolvency, or other legal proceedings.  
“Fraudulent Transfer Laws” has the meaning assigned to such term in Section 14.
“Guaranteed Obligations” means all of the following:
(a)All Indebtedness including, without limitation, any and all pre- and post-maturity interest thereon (including post-petition interest and expenses and attorneys’ fees), if Borrower is the debtor in a bankruptcy proceeding under the Debtor Relief Laws, whether or not allowed with respect to Borrower under any Debtor Relief Law (subject to Section 2(b) hereof regarding liability for the repayment of the Indebtedness). 
(b)All Obligations.
(c)Carveout Obligations.
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(d)All Completion Obligations. 
(e)All Expenses.
(f)Interest on the foregoing amounts in (b), (c), (d) and (e) in this definition from the date when due until the date paid at the Default Rate (as defined in the Note).
Notwithstanding the foregoing, “Guaranteed Obligations” does not include any Excluded Rate Contract Obligation.
“Hedge Agreement” has the meaning assigned to such term in the Loan Agreement. 
“Indebtedness” has the meaning assigned to such term in the Loan Agreement. 
“Lenders” means the Lenders described in the Loan Agreement, and their respective successors and assigns permitted under the Loan Agreement.
“Liquid Assets” means (a) Cash Equivalents, (b) Eligible Government Securities, and (c) Eligible Securities, as approved by Lender.
 “Loans” means the loans evidenced by the Note and secured by the Security Instrument as further described in the Loan Agreement.
“NAV” is defined as the sum of (a) the estimated market value of Guarantor’s assets, minus (b) the book value of Guarantor’s tangible liabilities determined according to GAAP, and shall be calculated in accordance with the standards set forth in the “Cautionary Statement and Regulation G Disclosure” section of Guarantor’s Investor Presentation dated as of March 15, 2021, except that (x) asset values shall reflect current annual appraised (such appraisals to be conducted in accordance with USPAP) or estimated market value (as verified by Bank in Bank’s reasonable discretion) as of each year-end, (y) pro forma adjustments shall be made to reflect any assets with estimated market values representing more than 10% of the latest NAV disposed of prior to the date of the certification, and (z) tangible liabilities shall exclude any tangible liabilities representing more than 10% of the latest NAV paid or otherwise extinguished prior to the date of the certification.
“Note” means, collectively, each Promissory Note executed by Borrower and payable to each of the Lenders in the aggregate principal face amount of the Loans, as the same may be renewed, amended, extended, restated, or modified and all notes given in substitution therefor.
 “Obligations” has the meaning assigned to such term in the Security Instrument. 
“Person” means any individual, corporation, partnership (general or limited), joint venture, limited liability company, association, trust, unincorporated association, joint stock company, government, municipality, political subdivision, agency, or other entity.
“Plans” means the plans and specifications and all modifications thereof and additions thereto, as more particularly described in the Loan Agreement.  
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“Public Market” means a nationally recognized United States public exchange or market acceptable to Lender on which securities, debt instruments, and/or mutual funds are regularly traded.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation under a Secured Rate Contract, each Guarantor that has total assets exceeding $10,000,000 at the time the relevant guarantee becomes effective with respect to such Swap Obligation under a Secured Rate Contract or such other person or entity who constitutes an “eligible contract participant” under the Commodity Exchange Act and who can cause another person or entity to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Regulatory Event” means, with respect to any issuer of any Eligible Government Securities or Eligible Securities, (a) there exists any investigation or proceeding made by any Governmental Authority against any director or senior officer of such issuer (to the extent the proposed violation is in connection with such Person’s duties at such issuer or could otherwise impact such Person’s role at such issuer) for violation or breach of Law that could result in a material adverse effect on such issuer, or (b) such issuer is subject to any insolvency or bankruptcy proceedings. 
“Secured Rate Contract” means any Secured Hedge Agreement which Lender has acknowledged in writing constitutes a “Secured Rate Contract” hereunder. 
“Security Instrument” means that certain Deed of Trust, Security Agreement and Assignment of Rents of even date herewith, executed by the Borrower in favor of the Trustee named therein, for the benefit of Agent, as Administrative Agent for the Lenders. 
“Subordinated Debt” has the meaning assigned to such term in Section 7.
“Swap Obligation” means, with respect to Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
2.Payment.
(a)Guarantor hereby unconditionally and irrevocably guarantees to Agent for the benefit of Lenders, as a continuing guaranty of payment, and not merely as a guaranty of collection, the prompt payment when due, whether at stated maturity, by required prepayment, by lapse of time, by acceleration of maturity, demand, or otherwise, and at all times thereafter, of the Guaranteed Obligations.  This Guaranty covers the Guaranteed Obligations, whether presently outstanding or arising subsequent to the date hereof, including all amounts advanced by Agent of any of the Lenders in stages or installments.  The guaranty of Guarantor as set forth in this Section is a continuing guaranty of payment and not a guaranty of collection.  Guarantor may be required to pay and perform the Guaranteed Obligations in full without assistance or support from Borrower or any other party.  If all or any part of the Guaranteed Obligations shall not be punctually paid when due, whether on the scheduled payment date, by lapse of time, by acceleration of maturity, or otherwise, Guarantor shall, immediately upon demand by Agent, pay the 
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amount due on the Guaranteed Obligations to Agent at Agent’s address for payment as set forth in the Note.  Any such demand may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Obligations, and may be made from time to time with respect to the same or different items of Guaranteed Obligations.
(b)Notwithstanding the foregoing, but subject to Section 2(d) below, at such time as the Borrower delivers to Agent evidence satisfactory to Agent that Completion has occurred and all the conditions set forth in Section 3.10 of the Loan Agreement with respect to Agent and Lenders’ obligations to make the final Advance have been satisfied, provided no Event of Default then exists, the liability of Guarantor with respect to Indebtedness only will be limited to 50% of the total amount of the Indebtedness; provided that Guarantor’s liability under each other clause of the definition of Guaranteed Obligations will not be affected.  
(c)Notwithstanding the foregoing, but subject to Section 2(d) below, at such time as the Borrower delivers to Lender evidence satisfactory to Lender that the Debt Service Coverage Ratio then equals or exceeds 1.25:1.00, calculated as of the end of the second calendar month preceding the date of such calculation, provided no Event of Default then exists, the liability of Guarantor with respect to Indebtedness only will be terminated in its entirety; provided that Guarantor’s liability under each other clause of the definition of Guaranteed Obligations will not be affected.  
(d)NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS GUARANTY INCLUDING WITHOUT LIMITATION ANY LIMITATION OR REDUCTION IN LIABILITY CONTAINED IN THE DEFINITION OF GUARANTEED OBLIGATIONS, GUARANTOR SHALL BE FULLY AND PERSONALLY LIABLE TO AGENT AND LENDERS FOR THE PAYMENT IN FULL OF THE INDEBTEDNESS AND PERFORMANCE OF THE OBLIGATIONS, IN ADDITION TO ANY LIABILITY FOR THE GUARANTEED OBLIGATIONS, IF THERE SHALL BE AN EVENT OF DEFAULT (REGARDLESS IF SUCH EVENT OF DEFAULT IS SUBSEQUENTLY CURED) UNDER:
(i)SECTION 8.5 (INSOLVENCY; BANKRUPTCY) OF THE LOAN AGREEMENT.
(ii)SECTION 8.9 (DISPOSITION OF PROPERTY OR BENEFICIAL INTEREST IN BORROWER) OF THE LOAN AGREEMENT.  
3.Performance.
(a)Guarantor hereby unconditionally and irrevocably guarantees to Agent and Lenders the timely performance of the Guaranteed Obligations, and not merely as a guaranty of collection.  If any of the Guaranteed Obligations are not satisfied or complied with in any respect whatsoever, and without the necessity of any notice from Agent or any Lenders to Guarantor, Guarantor agrees to indemnify and hold Agent and Lenders harmless from any and all loss, cost, liability, or expense that Agent and Lenders may 
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suffer by any reason of any such non-performance or non-compliance. The obligations and liability of Guarantor under this Section shall not be limited or restricted by the existence of, or any terms of, the guaranty of payment under Section 2 of this Guaranty.
(b)If an Event of Default exists or the Completion Obligations are not timely performed by Borrower in accordance with the Loan Documents (taking into account any applicable grace, notice or cure period), Agent may elect, in its sole discretion in a written notice to Guarantor, to require Guarantor to satisfy the Completion Obligations.  If Agent has requested Guarantor to perform the Completion Obligations pursuant hereto, Guarantor will be entitled to request and draw all of the undisbursed Loans proceeds intended to be used for the construction of the Improvements pursuant to the Budget (but not in excess of the committed amount of the Loans), together with any Completion Deposit.  Lenders shall disburse such funds for the purpose of, and to the extent necessary for, performance of the Completion Obligations, provided that: (i) Guarantor shall be performing the Completion Obligations or causing the performance of the same with due diligence;  (ii) Guarantor shall have made all required deposits into the Completion Deposit and all other deposits required under the Loan Agreement;  (iii) all disbursements of Loan proceeds to Guarantor shall be secured by the Loan Documents with the same priority as all previous advances of Loan proceeds to Borrower;  (iv) Guarantor shall have cured all continuing Events of Default, provided that Guarantor shall not be required to cure any non-monetary Event of Default which is personal to Borrower and therefore not susceptible to cure by Guarantor; and (v) Guarantor shall otherwise comply with the provisions of the Loan Agreement concerning the performance of the Completion Obligations including the requirements for advance requests and disbursement of proceeds of the Loans.
(c)If following Agent’s request of Guarantor to perform the Completion Obligations, the Completion Obligations are not timely performed by Guarantor in accordance with the Loan Documents (taking into account any applicable grace, notice or cure period), Agent may elect, in its sole discretion in a written notice to Guarantor, to cause the satisfaction of the Completion Obligations, which Guarantor will fully indemnify and hold harmless Agent and Lenders for, from and against all loss, cost, damage, expense or liability that Agent and Lenders may suffer in respect of Agent and Lenders’ performance of the Completion Obligations INCLUDING AGENT AND LENDERS’ NEGLIGENCE AND/OR STRICT LIABILITY, except to the extent that the same may result from the willful misconduct or gross negligence of Agent, Lenders or any of their respective employees or agents.  Agent may elect to perform such Completion Obligations before or after commencement of foreclosure proceedings or before or after exercise of any other right or remedy of Agent against Borrower or Guarantor, with such changes or modifications in the Plans that Agent deems necessary and expend such sums as Agent, in its discretion, deems necessary or advisable to complete the Improvements.  Guarantor hereby waives any right to contest any such necessary or advisable expenditures.  The amount of any and all expenditures made by Agent for the foregoing purposes shall be due and payable by Guarantor to Agent upon demand together with interest as provided in the Loan Documents.  Agent does not have and shall never have any obligation to complete the Improvements or take any action to cause such completion.  The liability and obligations under this subsection will not be 
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limited or restricted by the existence of any other section of this Guaranty or by the terms of any other guaranty relating to the Loans.
4.Primary Liability of Guarantor. 
(a)This Guaranty is an absolute, irrevocable, and unconditional guaranty of payment and performance. Guarantor is and shall be liable for the payment and performance of the Guaranteed Obligations, as set forth in this Guaranty, as a primary obligor.
(b)In the event of default in payment or performance of the Guaranteed Obligations, or any part thereof, when such Guaranteed Obligations become due, whether by its terms, by acceleration, or otherwise, Guarantor shall promptly pay the amount due thereon to Agent without notice or demand, of any kind or nature (except to the extent expressly required by the Loan Documents), in lawful money of the United States of America or perform the obligations to be performed hereunder, and it shall not be necessary for Agent or any of the Lenders in order to enforce such payment and performance by Guarantor first, or contemporaneously, to institute suit or exhaust remedies against Borrower or any other Person liable on the Guaranteed Obligations, or any part thereof, or to enforce any rights, remedies, powers, privileges, or benefits of Agent or Lenders against any property, security, or other collateral which shall ever have been given to secure the Guaranteed Obligations.
(c)Suit may be brought or demand may be made against Guarantor or any other guaranty in favor of Agent (on behalf of Lenders) covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together, without impairing the rights of Agent against any party hereto.  Any time that Agent is entitled to exercise its rights or remedies hereunder, Agent may in its discretion elect to demand payment and/or performance.  If Agent elects to demand performance, then it shall at all times thereafter have the right to demand payment until all of the Guaranteed Obligations have been paid and performed in full.  If Agent elects to demand payment, then it shall at all times thereafter have the right to demand performance until all of the Guaranteed Obligations have been paid and performed in full.
5.Other Guaranteed Obligations.  If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any of the Lenders, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights hereunder shall be cumulative of any and all other rights that Agent or any of the Lenders may ever have against Guarantor.  The exercise by Agent or any of the Lenders of any right hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right by Agent or any of the Lenders.
6.Waiver of Subrogation.  Notwithstanding anything to the contrary contained herein, until the Indebtedness has been indefeasibly paid, the Obligations have been fully performed and any commitments of Agent and the Lenders with respect to the Guaranteed Obligations are terminated, Guarantor waives to the extent permitted by applicable law any right of subrogation, reimbursement, indemnification, or contribution arising from Borrower to 
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Guarantor.  If Guarantor is or becomes an “insider” under any Debtor Relief Law with respect to Borrower, then Guarantor hereby irrevocably and absolutely waives any and all rights of contribution, indemnification, reimbursement or any similar rights against Borrower with respect to this Guaranty (including any right of subrogation, except to the extent of collateral held by Agent), whether such rights arise under an express or implied contract or by operation of law.  It is the intention of the parties that Guarantor shall not be deemed to be a “creditor” under any Debtor Relief Law of Borrower by reason of the existence of this Guaranty.
7.Subordinated Debt.  All indebtedness, liabilities, and obligations of Borrower to Guarantor (the “Subordinated Debt”) now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether evidenced by written instrument or not, shall be expressly subordinated to the Guaranteed Obligations.  Until such time as the Guaranteed Obligations are paid and performed in full and all commitments to lend under the Loan Documents have terminated, Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time an Event of Default exists before or after giving effect thereto; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor will hold any such payment in trust for Agent and forthwith turn it over to Agent in the form received, to be applied to the Guaranteed Obligations, but without reducing or affecting in any manner the liability of the Guarantor under this Guaranty.
8.Obligations Not to be Diminished.  Guarantor hereby agrees that its obligations under this Guaranty shall not be released, discharged, diminished, impaired, reduced, or affected for any reason or by the occurrence of any event (other than the actual payment or performance thereof), including, without limitation, one or more of the following events, whether or not with notice to or the consent of Guarantor:  (a) the taking or accepting of collateral as security for any or all of the Guaranteed Obligations or the release, surrender, exchange, or subordination of any collateral now or hereafter securing any or all of the Guaranteed Obligations; (b) any partial release of the liability of  Borrower or the full or partial release of any other guarantor or obligor from liability for any or all of the Guaranteed Obligations; (c) any disability, dissolution, insolvency, or bankruptcy of Borrower, or any other guarantor, or any other party at any time liable for the payment of any or all of the Guaranteed Obligations; (d) any renewal, extension, modification, waiver, amendment, or rearrangement of any or all of the Guaranteed Obligations or any instrument, document, or agreement evidencing, securing, or otherwise relating to any or all of the Guaranteed Obligations, including changes in the Plans and other terms or aspects of construction of the Improvements; (e) any adjustment, indulgence, forbearance, waiver, or compromise that may be granted or given by Agent to Borrower, Guarantor, or any other party ever liable for any or all of the Guaranteed Obligations; (f) any neglect, delay, omission, failure, or refusal of Agent to take or prosecute any action for the collection of any of the Guaranteed Obligations or to foreclose or take or prosecute any action in connection with any instrument, document, or agreement evidencing, securing, or otherwise relating to any or all of the Guaranteed Obligations; (g) the unenforceability or invalidity of any or all of the Guaranteed Obligations or of any instrument, document, or agreement evidencing, securing, or otherwise relating to any or all of the Guaranteed Obligations; (h) any payment by Borrower or any other party to Agent is held to constitute a preference under applicable bankruptcy or insolvency law or if for any other reason Agent is required to refund any payment or pay the amount thereof to someone else; (i) the settlement or compromise of any of the Guaranteed Obligations; (j) the 
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non-perfection of any security interest or lien securing any or all of the Guaranteed Obligations; (k) any impairment of any collateral securing any or all of the Guaranteed Obligations; (l) the failure of Agent to sell any collateral securing any or all of the Guaranteed Obligations in a commercially reasonable manner or as otherwise required by law; (m) any change in the corporate, partnership, or limited liability company, as applicable, existence, structure, or ownership of Borrower; or (n) any other circumstance which might otherwise constitute a defense available to, or discharge of, Borrower or Guarantor, other than the actual payment of the Indebtedness or performance of the Obligations.
9.Waivers.  Guarantor waives for the benefit of Agent: (a) any right to revoke this Guaranty with respect to future Indebtedness; (b) any right to require Agent to do any of the following before Guarantor is obligated to pay the Guaranteed Obligations or before Agent may proceed against Guarantor: (i) sue or exhaust remedies against Borrower or any other guarantors or obligors; (ii) sue on an accrued right of action in respect of any of the Guaranteed Obligations or bring any other action, exercise any other right, or exhaust all other remedies or (iii) enforce rights against Borrower’s assets or any collateral pledged by Borrower to secure the Guaranteed Obligations; (c) any right relating to the timing, manner, or conduct of Agent’s enforcement of rights against Borrower’s assets or any collateral pledged by Borrower to secure the Guaranteed Obligations; (d) if both Guarantor and Borrower or any other Person have pledged assets to secure the Guaranteed Obligations, any right to require Agent to proceed first against any such other collateral before proceeding against any collateral pledged by Guarantor; (e) except as expressly required hereby, promptness, diligence, notice of any default under the Guaranteed Obligations, notice of acceleration or intent to accelerate, demand for payment, notice of acceptance of this Guaranty, presentment, notice of protest, notice of dishonor, notice of the incurring by Borrower of additional indebtedness, notice of any suit or other action by Agent against Borrower or any other Person, any notice to any Person liable for the obligation which is the subject of the suit or action, and all other notices and demands with respect to the Guaranteed Obligations and this Guaranty; (f) (i) any principles or provisions of law, statutory, or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of Guarantor’s obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantor’s liability hereunder or the enforcement hereof, and (iii) any requirement that Agent protect, secure, perfect, or insure any security interest or lien or any property subject thereto; and (g) any and all rights or defenses regardless whether they arise under (i) Section 43.001–005 of the Tex. Civ. Prac. & Rem. Code, as amended (ii) Section 17.001 of the Texas Civil Practice and Remedies Code, as amended, (iii) Rule 31 of the Texas Rules of Civil Procedure, as amended, (iv) common law, in equity, under contract, by statute, or otherwise, or (v) Sections 51.003, 51.004 and 51.005 of the Texas Property Code, as amended.
10.Insolvency.  Should Guarantor become insolvent, or fail to pay Guarantor’s debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law, or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Obligations shall be, as between Guarantor and Agent and each of the Lenders, a fully matured, due, and payable obligation of Guarantor to Agent and to each of the Lenders (without regard to whether Borrower is then in default under any of the Loan Documents or whether the Obligations, or any part thereof is then due and performable by 
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Borrower or any other party to Agent and to Lenders), payable in full by Guarantor to Agent and to each of the Lenders upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder.
11.Termination; Reinstatement.  Guarantor’s obligations hereunder shall remain in full force and effect until all commitments to lend under the Loan Documents have terminated, and the Guaranteed Obligations have been paid in full.  If at any time any payment of the principal of or interest on or any other amount payable by Borrower under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy, or reorganization of Borrower or otherwise, then Guarantor’s obligations hereunder with respect to such payment shall be reinstated as though such payment had been due but not made at such time.
12.Representations and Warranties.  Guarantor represents and warrants the following:  
(a)It is duly organized and in good standing under the laws of the jurisdiction of its organization and has full capacity and right to make and perform this Guaranty, and all necessary authority has been obtained.  
(b)This Guaranty constitutes its legal, valid, and binding obligation enforceable in accordance with its terms, except as limited by Debtor Relief Laws.
(c) The making and performance of this Guaranty does not and will not violate the provisions of any applicable law, regulation, or order, and does not and will not result in the breach of, or constitute a default or require any consent (that has not been obtained) under, any material agreement, instrument, or document to which Guarantor is a party or by which it or any of its property may be bound or affected.
(d)All consents, approvals, licenses, and authorizations of, and filings and registrations with, any Governmental Authority required under applicable law and regulations for the making and performance of this Guaranty have been obtained or made and are in full force and effect. 
(e)By virtue of its relationship with Borrower, the execution, delivery, and performance of this Guaranty is for the direct benefit of Guarantor and it has received good, valuable and sufficient consideration for this Guaranty.  
(f)Guarantor has, independently and without reliance upon Agent or any of the Lenders and based upon such documents and information as Guarantor has deemed appropriate, made its own analysis and decision to enter into this Guaranty. 
(g)Guarantor has adequate means to obtain from Borrower on a continuing basis information concerning the financial condition and assets of Borrower, and Guarantor is not relying upon Agent or any of the Lenders to provide (and Agent and the Lenders shall have no duty to provide) any such information to Guarantor either now or in the future. 
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(h)All of the assets listed on Guarantor’s financial statements delivered to Agent and to be delivered to Agent are available to pay the Guaranteed Obligations without the joinder of any other party. 
(i)All information, financial statements, reports, papers, and data given or to be given to Agent by or on behalf of Guarantor are now, or at the time of preparation will be, accurate, complete, and correct in all material respects and do not, or will not, knowingly omit any fact that is necessary to prevent the facts contained therein from being materially misleading.
(j)Guarantor is the beneficial owner of a direct or indirect interest in Borrower.  The value of the consideration and benefit received and to be received by Guarantor, directly or indirectly, as a result of the extension of credit to Borrower is a substantial and direct benefit to Guarantor.
(k)No Material Adverse Event has occurred with respect to Guarantor.
(l)The making and performance of this Guaranty does not result in the creation or imposition of any lien, charge, or encumbrance of any nature upon any of Guarantor’s property or assets.
(m)Guarantor (i) has filed on or before the respective due dates all federal, state, county, municipal, city, income, and other tax returns required to have been filed by Guarantor, including, without limitation, those required under the Tax Code, (ii) is not delinquent in filing those returns or extensions, if any, (iii) has paid all taxes and related liabilities that are due pursuant to those returns or pursuant to any assessments received by Guarantor to the extent those taxes have become due, (iv) does not know of any basis for any additional assessment regarding any such taxes and related liabilities, and (v) believes its tax returns reflect the income and taxes of Guarantor for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit; provided, however, that Guarantor may make a good faith contest of any amounts referenced in this subsection in the manner provided in the Loan Agreement.
(n)Except as disclosed in writing to Agent, there are no (i) judicial, administrative, mediation, or arbitration actions, suits, or proceedings, at law or in equity, before any Governmental Authority or arbitrator pending or threatened in writing against or affecting Guarantor that, if decided adversely, will have a Material Adverse Event (as defined in the Loan Agreement), or (ii) outstanding or unpaid judgments against Guarantor.
(o)No bankruptcy or insolvency proceedings are pending or contemplated by Guarantor.
(p)Guarantor is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended, nor is Guarantor “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
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(q)Guarantor is not engaged principally, or as one of its important activities, directly or indirectly, in the business of extending credit for the purpose of purchasing or carrying margin stock, and none of the proceeds of the Note shall be used, directly or indirectly, to purchase or carry any margin stock or made available by Guarantor in any manner to any other Person to enable or assist that Person in Purchasing or carrying margin stock, or shall be otherwise used or made available for any other purpose that might violate the provisions of Regulations G, T, U, or X of the Board of Governors of the Federal Reserve System.
(r)There are no outstanding citations, notices or orders of non-compliance issued to Guarantor or relating to its businesses, assets, property, leaseholds or equipment under any such laws, rules or regulations.
(s)Guarantor, and each of Guarantor’s Affiliates, are in compliance with (i) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended), and all other enabling legislation or executing order relating thereto, (ii) the Patriot Act, and (iii) all other federal or state laws relating to “know your customer” and anti-money laundering rules and regulations.  Guarantor authorizes Agent to obtain, verify and record information that identifies Guarantor that may include the names and addresses of such parties and other information that will allow Agent to identify such parties in accordance with the requirements of Anti-Terrorism Laws.
13.Covenants.  So long as this Guaranty remains in full force and effect, Guarantor shall, unless Agent shall otherwise consent in writing:
(a)Maintain full and accurate books and other records (in accordance with the Accounting Principles).
(b)Furnish to Agent the financial information required to be delivered under the Loan Agreement, together with such additional information concerning Guarantor as Agent may request. 
(c)Obtain at any time and from time to time all authorizations, licenses, consents, or approvals as shall now or hereafter be necessary or desirable under all applicable laws or regulations or otherwise in connection with the execution, delivery, and performance of this Guaranty and will promptly furnish copies thereof to Agent.
(d)From time to time at the reasonable request of Agent, Guarantor shall promptly deliver to Agent any certification or other evidence reasonably requested by Agent confirming compliance by Guarantor with all Anti-Terrorism Laws, and confirming that neither Guarantor (nor any Person owning any direct interest of any nature whatsoever in Guarantor) is a Prohibited Person, and
(e)If Agent or any of the Lenders reasonably believes that Guarantor or any Affiliate of Guarantor may have breached any of the representations, warranties, or covenants set forth in the Loan Documents relating to any Anti-Terrorism Laws or the identity of any Person as a Prohibited Person, then Agent and each of the Lenders shall 
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have the right, with or without notice to Borrower, Guarantor, or any other Person, to (i) notify the appropriate Governmental Authority and to take such action as such Governmental Authority or applicable Anti-Terrorism Laws may direct, (ii) decline any payment (or deposit such payment with an appropriate United States Governmental Authority) or decline any prepayment or consent request, and/or (iii) declare an Event of Default and immediately accelerate the Indebtedness in connection therewith.  Guarantor agrees that Guarantor shall not assert any claim (and hereby waives, for itself and on behalf of such other Persons any claim that they may now or hereafter have) against Agent or any Lenders or any of their Affiliates, successors, assigns, representatives, or agents for any form of damages as a result of any of the foregoing actions, regardless of whether or not Agent or such Lender’s reasonable belief is ultimately demonstrated to be accurate.
(f)Maintain minimum unencumbered Liquid Assets of at least $10,000,000.00.  Within ninety (90) days after the end of each fiscal year of Guarantor, commencing with the period ending December 31, 2021, Guarantor shall deliver to Bank verification of Guarantor’s Liquid Assets and compliance with this covenant in form and substance acceptable to Bank, in Bank’s sole discretion.
(g)Maintain a NAV of at least $125,000,000.00.  Within ninety (90) days after the end of each fiscal year of Guarantor, commencing with the period ending December 31, 2021, Guarantor shall deliver to Bank verification of Guarantor’s NAV and compliance with this covenant in form and substance acceptable to Bank, in Bank’s sole discretion.
14.No Fraudulent Transfer.  It is the intention of Guarantor and Agent that the amount of the Guaranteed Obligations guaranteed by Guarantor by this Guaranty shall be in, but not in excess of, the maximum amount permitted by fraudulent conveyance, fraudulent transfer, or similar laws applicable to Guarantor (collectively, “Fraudulent Transfer Laws”).  Accordingly, notwithstanding anything to the contrary contained in this Guaranty or any other agreement or instrument executed in connection with the payment of any of the Guaranteed Obligations, the amount of the Guaranteed Obligations guaranteed by Guarantor by this Guaranty shall be limited to that amount which after giving effect thereto would not (a) render Guarantor insolvent, (b) result in the fair saleable value of the assets of Guarantor being less than the amount required to pay its debts and other liabilities (including contingent liabilities) as they mature, or (c) leave Guarantor with unreasonably small capital to carry out its business as now conducted and as proposed to be conducted, including its capital needs, as such concepts described in clauses (a), (b) and (c) of this Section are determined under applicable law, if the obligations of Guarantor hereunder would otherwise be set aside, terminated, annulled or avoided for such reason by a court of competent jurisdiction in a proceeding actually pending before such court.  For purposes of this Guaranty, the term “applicable law” means as to Guarantor each statute, law, ordinance, regulation, order, judgment, injunction or decree of the United States or any state or commonwealth, any municipality, any foreign country, or any territory, possession or governmental authority applicable to Guarantor.  Any analysis of the provisions of this Guaranty for purposes of Fraudulent Transfer Laws shall take into account the right of contribution against any other Guarantor and, for purposes of such analysis, give effect to any discharge of intercompany debt as a result of any payment made under the Guaranty.
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15.Successors and Assigns.  This Guaranty is for the benefit of Agent, Lenders and their respective successors and assigns, and, in the event of an assignment of the Guaranteed Obligations, or any part thereof, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness.  This Guaranty is binding on Guarantor, and Guarantor’s successors and permitted assigns; provided that, Guarantor may not assign its obligations under this Guaranty without obtaining Agent’s prior written consent, and any assignment purported to be made without Agent’s prior written consent shall be null and void.
16.Setoff Rights.  Agent shall have the right to set off and apply against this Guaranty or the Guaranteed Obligations or both, at any time during the existence of an Event of Default and without notice to Guarantor, any and all deposits (general or special, time or demand, provisional or final) or other sums at any time credited by or owing from Agent to Guarantor whether or not the Guaranteed Obligations are then due and irrespective of whether or not Agent shall have made any demand under this Guaranty.  As further security for this Guaranty and the Guaranteed Obligations, Guarantor hereby grants to Agent a security interest in all deposits (general or special, time or demand, provisional or final) other accounts of Guarantor, money, instruments, and other property of Guarantor now or hereafter on deposit with or held by Agent and all other sums at any time credited by or owing from Agent to Guarantor.  The rights and remedies of Agent hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Agent may have.
17.Time of Essence; Recitals.  Time shall be of the essence in this Guaranty with respect to all of Guarantor’s obligations hereunder.  The recitals of this Guaranty are incorporated into this Guaranty. 
18.Choice of Law; Venue.  THIS GUARANTY AND ANY CONTROVERSY, DISPUTE, CLAIM OR CAUSE OF ACTION  ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER LOAN DOCUMENTS, THE BREACH THEREOF, THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY OTHER DISPUTE BETWEEN OR AMONG THE PARTIES TO THE LOAN DOCUMENTS (WHETHER IN CONTRACT, TORT OR OTHERWISE) SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND INTERPRETED PURSUANT TO  THE LAWS OF THE STATE OF TEXAS; PROVIDED THAT AGENT SHALL RETAIN ALL RIGHTS UNDER FEDERAL LAW.  THIS GUARANTY HAS BEEN ENTERED INTO IN DALLAS COUNTY, TEXAS, AND IS PERFORMABLE FOR ALL PURPOSES IN DALLAS COUNTY, TEXAS.  THE PARTIES HEREBY AGREE THAT ANY LAWSUIT, ACTION, OR PROCEEDING THAT IS BROUGHT (WHETHER IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED THEREBY, OR THE ACT, CONDUCT, OR OMISSION OF AGENT, LENDERS OR ANY OF THEIR RESPECTIVE AGENTS IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS SHALL BE BROUGHT IN A STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED IN DALLAS COUNTY, TEXAS. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS, (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH LAWSUIT, ACTION, OR PROCEEDING BROUGHT IN ANY SUCH COURT, 
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AND (C) FURTHER WAIVES ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH COURT IS AN INCONVENIENT FORUM.  EACH OF THE PARTIES HERETO AGREE THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED AT THE ADDRESS FOR NOTICES REFERENCED IN SECTION 19 HEREOF.   
19.Notices.  Whenever any notice is required or permitted to be given under the terms of this Guaranty, the same shall, except as otherwise expressly provided for in this Guaranty, be given in writing, and sent by: (a) certified mail, return receipt requested, postage pre-paid; (b) a national overnight delivery service; (c) hand delivery with written receipt acknowledged; or (d) facsimile, followed by a copy sent in accordance with clause (b) or (c) of this Section sent the same day as the facsimile, in each case to the address or facsimile number (together with a contemporaneous copy to each copied addressee), as applicable, in the case of Guarantor, set forth on the signature page to this Guaranty, and in the case of Agent, set forth in the Loan Agreement.  Agent and Guarantor shall not conduct communications contemplated by this Guaranty by electronic mail or other electronic means, except by facsimile transmission as expressly provided in this Section, and the use of the phrase “in writing” or the word “written” shall not be construed to include electronic communications except by facsimile transmissions as expressly provided in this Section.  Any notice required or given hereunder shall be deemed received the same Business Day if sent by hand delivery or facsimile, the next Business Day if sent by overnight courier, or 3 Business Days after posting if sent by certified mail, return receipt requested; provided that any notice received after 5:00 p.m. Dallas, Texas time on any Business Day or received on any day that is not a Business Day shall be deemed to have been received on the following Business Day.  
20.Amendments; Counterparts.  This Guaranty may be amended only by an instrument in writing executed by Guarantor and Agent.  This Guaranty may be executed in multiple counterparts, each of which, for all purposes, shall be deemed an original, and all of which taken together shall constitute but one and the same instrument.
21.Joint and Several Liability.  The promises and agreements herein shall be construed to be and are hereby declared to be the joint and several promises and agreements of each Guarantor and shall constitute the joint and several obligations of each Guarantor and shall be fully binding upon and enforceable against each Guarantor.  Neither the death nor release of any Person or party to this Guaranty shall affect or release the joint and several liability of any other Person or party.  Agent may at its option enforce this Guaranty against one or any Guarantor, and Agent shall not be required to resort to enforcement against each Guarantor, and the failure to proceed against or join any Guarantor shall not affect the joint and several liability of any other Guarantor.
22.Keepwell.  Each Qualified ECP Guarantor hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Guarantor to honor all of its obligations under this Guaranty in respect of Swap Obligations (if any) under any Secured Rate Contract (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section, or otherwise under this Guaranty, voidable under applicable law relating to 
                        17

fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect as long as this Guaranty remains in effect.  Each Qualified ECP Guarantor intends that this Section constitute, and this Section shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each Guarantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
23.Waiver of Consequential, Punitive and Speculative Damages.  Neither Agent, nor any Lenders, nor any of their respective Affiliates, officers, directors, employees, attorneys, or agents, shall have any liability with respect to any claim for any special, indirect, incidental, or consequential damages (including any claim for loss of profits, revenue or business) suffered or incurred by Borrower or Guarantor  or any other Loan Party however caused and based on any theory of liability arising out of, or in any way related to, this Guaranty or any of the other Loan Documents, or any of the transactions contemplated by this Guaranty or any of the other Loan Documents, or the conduct, acts, or omissions of Agent, Lenders or any of their agents in the negotiation, administration, or enforcement thereof. GUARANTOR HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE AGENT, LENDERS OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, OR AGENTS FOR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, OR THE CONDUCT, ACTS OR OMISSIONS OF AGENT, LENDERS  OR ANY OF THEIR RESPECTIVE AGENTS IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT OF THIS GUARANTY OR ANY OF THE LOAN DOCUMENTS.
24.WAIVER OF JURY TRIAL.  THE PARTIES ACKNOWLEDGE THAT THE RIGHT TO A TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT SUCH RIGHT MAY BE WAIVED. AGENT AND GUARANTOR AFTER CONSULTING (OR HAVING THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND EXPRESSLY WAIVE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING IN ANY WAY TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE CONDUCT, ACTS OR OMISSIONS OF AGENT OR LENDERS OR BORROWER OR GUARANTOR OR ANY OF THE OTHER LOAN PARTIES OR ANY OF THEIR AGENTS IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE 
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BEEN INDUCED TO ENTER INTO THE LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.  
25.Final Agreement.  THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.  
[Remainder of Page Intentionally Left Blank - Signature Page Follows]

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EXECUTED to be effective as of the date first above written.
GUARANTOR:
STRATUS PROPERTIES INC.,
a Delaware corporation
By:    /s/ Erin D. Pickens                
Erin D. Pickens,
Senior Vice President

STATE OF TEXAS        §
                §
COUNTY OF TRAVIS    §

The foregoing instrument was acknowledged before me this 20th day of May, 2021, by Erin D. Pickens, Senior Vice President of Stratus Properties Inc., a Delaware corporation, on behalf of said entity, who is personally known to me, and did take an oath.  

/s/ Connie J. Carley     
Notary Public in and for the State of Texas
[SEAL]
Printed Name: Connie J. Carley    
My Commission Expires: 1-22-2023    

Guaranty
Signature PageDocument

Severance and Change of Control Agreement

This Severance and Change of Control Agreement (the “Agreement”) between Stratus Properties Inc., a Delaware corporation, and William H. Armstrong III (the “Executive”) is dated effective as of April 1, 2022 (the “Agreement Date”).
ARTICLE I
Definitions
1.1Board.  “Board” shall mean the Board of Directors of the Company.
1.2Cause.  “Cause” shall mean:
(a)The Executive’s willful and continued failure to perform substantially the Executive’s duties with the Company 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 Company or any of 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 Company 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 Company 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 Company 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.

1.3Change 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 Agreement Date, 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 Agreement Date whose election, or nomination for election by the Company’s stockholders, 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 Company, and
(B)no Person together with all Affiliates of such Person (excluding the Company and any employee benefit plan or related trust of the Company or any of its subsidiaries) Beneficially Owns 30% or more of the then outstanding shares of Common Stock or 30% or more of the combined voting power of the then outstanding voting securities of the Company, and
(C)at least a majority of the members of the board of directors of the Company 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 stockholders of the Company of a complete liquidation or dissolution of the Company.
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(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.
1.4Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
1.5Common Stock:  “Common Stock” shall mean the common stock, $0.01 par value per share, of the Company.
1.6Company.  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.  Following a Change of Control, “Company” shall refer to the Post-Transaction Corporation.
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1.7Disability.  “Disability” shall mean:
(a)A disability entitling the Executive to receive benefits under a long-term disability insurance policy maintained by the Company 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 Company 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 Company 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 Company 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 the 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 Company 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 the Executive’s status as an officer and employee becomes effective due to Disability.
1.8Good Reason.  “Good Reason” shall mean:
(a)Any material breach by the Company of any of the provisions of this Agreement; or
(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 of the Agreement Date, or any other action that results in a material diminution in such position, authority, duties or responsibilities; provided that prior to a Change of Control the Company ceasing to have a class of common equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, shall not constitute “Good Reason.”
(c)Following a Change of Control, as defined in Section 1.3 hereof, “Good Reason” will also include:
(i)Any failure of the Company 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.  For the avoidance of doubt, 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 
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holds an equivalent position in the Company and the Company has a class of common equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, if such was the case prior to the Change of Control;
(ii)The Company requiring the Executive to be based at any office or location more than 35 miles from the office or location where Executive was employed immediately preceding the Change of Control, or requiring the Executive to travel on business to a substantially greater extent than required immediately prior to a Change of Control; or
(iii)Any failure by the Company to comply with and satisfy Sections 4.1(c) and (d) of this Agreement.
Notwithstanding the foregoing, the Executive shall not have the right to terminate the Executive’s employment hereunder for Good Reason unless (1) within 30 days of the initial existence of the condition or conditions giving rise to such right the Executive provides written notice to the Company of the existence of such condition or conditions, and (2) the Company fails to remedy such condition or conditions within 30 days following the receipt of such written notice (the “Cure Period”). If any such condition is not remedied within the Cure Period, the Executive must terminate the Executive’s employment with the Company within a reasonable period of time, not to exceed 30 days, following the end of the Cure Period.

1.9Section 409A.  “Section 409A” shall mean Section 409A of the Code and the regulations and guidance issued thereunder.
1.10Termination Date.  “Termination Date” shall mean, if the Executive’s status as an officer and employee is terminated (i) by reason of the Executive’s death, the date of the 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
Severance and Change of Control Benefits
2.1Term and Capacity after Change of Control.   
(a)This Agreement shall commence on the Agreement Date and continue in effect through March 31, 2025 (the “Initial Term”).  If the Executive continues to serve as an officer of the Company and a Change of Control occurs during the Initial Term, then the Executive’s employment term (the “Employment Term”) shall continue through the third anniversary of the Change of Control, subject to any earlier termination of the Executive’s employment 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 
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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.  The Executive’s position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with the 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 Company.  
2.2Compensation 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 Company and its Affiliates.
(b)Bonus.  The Executive shall be entitled to participate in an annual incentive bonus program applicable to other most senior executives of the Company 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 the 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 Company and its Affiliates.  Any such bonus shall be paid in cash no later than two and a half months 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 Company 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 Company 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 
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applicable generally to other most senior executives of the Company 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 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 Company 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 Company 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 Company 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 Company 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 Company 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 Company 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 Company and its Affiliates.
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2.3Obligations upon Termination prior to a Change of Control.
(a)Termination by the Company without Cause or by the Executive for Good Reason.  If during the Initial Term, and prior to a Change of Control, the Company terminates the Executive’s employment without Cause, or the Executive terminates his employment for Good Reason, then, subject to Section 2.6 and, if applicable, the six-month delay set forth in Section 2.10:
(i)The Company will pay to the Executive the Executive’s Base Salary earned through the Termination Date to the extent not previously paid (the “Accrued Salary”);
(ii)The Company will pay to the Executive in a lump sum in cash an amount equal to the sum of (A) a pro rata bonus in an amount determined by (1) calculating the average of the annual bonus received by the Executive for the three most recently completed fiscal years prior to the Termination Date, then (2) 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”), and (B) an amount equal to the sum of (x) the Executive’s Base Salary in effect at the Termination Date and (y) the average annual bonus awarded to the Executive for the three fiscal years immediately preceding the Termination Date (excluding any payments for long-term incentives);
(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 Company will at its expense provide, either as part of a group policy or as such policy may be converted to an individual policy, health, dental, vision and life insurance (the “benefit plans”) in which the Executive was entitled to participate as an employee as of the Termination Date; provided that the Executive’s continued participation is possible under the general terms and provisions of each such plan and all applicable laws.  If the Executive is a “specified employee” governed by Section 2.10 hereof, to the extent that any benefits provided to the Executive under this Section 2.3(a)(iii) are taxable to the Executive, then, with the exception of nontaxable medical insurance benefits, the value of the aggregate amount of such taxable benefits provided to the Executive pursuant to this Section 2.3(a)(iii) during the six month period following the Termination Date shall be limited to the amount specified by Section 402(g)(1)(B) of Code for the year in which the termination occurred.  The Executive shall pay the cost of any benefits that exceed the amount specified in the previous sentence during the six-month period following the date of termination, and shall be reimbursed in full by the Company during the seventh month after the Termination Date.  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 the Executive than the most favorable of such coverages and benefits provided to active employees of the Company during the Continuation Period.  If the Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Company will use its best efforts to provide the Executive with benefits substantially similar or comparable in value to those the Executive would otherwise have been entitled to receive under such plans.  At the end of the 
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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 Company that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for medical coverage under COBRA.  Notwithstanding the above, if the payment of health insurance premiums for the Executive is not permitted by the Patient Protection and Affordable Care Act, then in lieu of the health benefits provided for herein, the lump sum cash payment described in Section 2.3(a)(ii) will by increased by an amount equal to the first monthly COBRA premium multiplied by the maximum number of months in the Continuation Period; 
(iv)All benefits that the Executive is entitled to receive pursuant to benefit plans maintained by the Company 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 Company 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 Company with respect to services rendered by the Executive prior to the Termination Date.
(b)Termination for Other Reasons.  If during the Initial Term and prior to a Change of Control, the Executive’s employment  is terminated by the Company for Cause, by the Executive without Good Reason, or for any other reason (other than as set forth in Section 2.3(a)), the Company 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 Company with respect to services rendered by the Executive prior to the Termination Date.
2.4Obligations 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 employment is terminated by reason of the Executive’s death, (2) the Company terminates the Executive’s employment by reason of the Executive’s Disability, or (3) the Executive retires and terminates his employment, then, subject to Section 2.6 and, if applicable, the six-month delay set forth in Section 2.10:
(i)The Company or an Affiliate will pay to the Executive or his legal representatives the Executive’s Accrued Salary;  
(ii)The Company or an Affiliate will pay to the Executive or his legal representatives the Pro Rata Bonus; and
(iii)The Company 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 Company or its Affiliates with respect to services rendered by the Executive prior to the Termination Date.
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(b)Termination by the Company for Cause; by the Executive for other than Good Reason.  If, after a Change of Control and during the Employment Term, the Executive’s employment is terminated by the Company or an Affiliate for Cause, or by the Executive for other than Good Reason, the Company 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 Company or Affiliate with respect to services rendered by the Executive prior to the Termination Date.
(c)Termination by the Company for Reasons other than Death, Disability or Cause; by the Executive for Good Reason.  If, after a Change of Control and during the Employment Term, (1) the Company or an Affiliate terminates the Executive’s employment other than for Cause, death or Disability, or (2) the Executive terminates his employment for Good Reason, then, subject to Section 2.6, and, if applicable, the six-month delay set forth in Section 2.10:
(i)The Company or an Affiliate will pay to the Executive the Accrued Salary; 
(ii)The Company or an Affiliate will pay to the Executive in a lump sum in cash (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 for the three fiscal years immediately preceding the Termination Date (excluding any payments for long-term incentives); 
(iii)For the Continuation Period, the Company or its Affiliate will at its expense provide, either as part of a group policy or as such policy may be converted to an individual policy, health, dental, vision and life insurance (the “benefit plans”) in which the Executive was entitled to participate as an employee as of the Termination Date; provided that the Executive’s continued participation is possible under the general terms and provisions of each such plan and all applicable laws.  If the Executive is a “specified employee” governed by Section 2.10 hereof, to the extent that any benefits provided to the Executive under this Section 2.4(c)(iii) are taxable to the Executive, then, with the exception of nontaxable medical insurance benefits, the value of the aggregate amount of such taxable benefits provided to the Executive pursuant to this Section 2.4(c)(iii) during the six month period following the Termination Date shall be limited to the amount specified by Section 402(g)(1)(B) of Code for the year in which the termination occurred.  The Executive shall pay the cost of any benefits that exceed the amount specified in the previous sentence during the six-month period following the date of termination, and shall be reimbursed in full by the Company during the seventh month after the Termination Date.  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 the Executive than the most favorable of such coverages and benefits provided to active employees of the Company or its Affiliate during the Continuation Period.  If the Executive’s participation in any such benefit plan is barred or any such benefit plan is terminated, the Company or its Affiliate will use its best efforts to provide the Executive with benefits substantially similar or comparable in value to those the Executive would otherwise 
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have been entitled to receive under such plans.  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 Company or its Affiliate that relates specifically to the Executive.  To the maximum extent permitted by law, the Executive will be eligible for medical coverage under COBRA.  Notwithstanding the above, if the payment of health insurance premiums for the Executive is not permitted by the Patient Protection and Affordable Care Act, then in lieu of the health benefits provided for herein, the lump sum cash payment described in Section 2.4(c)(ii) will by increased by an amount equal to the first monthly COBRA premium multiplied by the maximum number of months in the Continuation Period; 
(iv)All benefits that the Executive is entitled to receive pursuant to benefit plans maintained by the Company 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 Company 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 Company or Affiliate with respect to services rendered by the Executive prior to the Termination Date.
2.5Nondisclosure 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 triggering obligations of the Company pursuant to Section 2.3 or 2.4.
2.6Most 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 employment 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.  
2.7Excise 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 2.4(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 2.4(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 
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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 Executive 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 2.4(c) hereof.
(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 Company 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 Company 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).
2.8Incentive Awards.  The foregoing benefits are intended to be in addition to the value of any other equity or incentive awards that may be due or that will remain outstanding pursuant to the their terms in connection with a termination of employment, including but not limited to, equity-based incentive awards such as options to acquire Common Stock and restricted stock units granted under the Company’s stock incentive plans, participation interests under the Company’s Profit Participation Incentive Plan, and any other incentive or similar plan heretofore or hereafter adopted by the Company.
2.9Resignation from Board of Directors.  If the Executive is a director of the Company and his employment is terminated for any reason other than death, the Executive will, if requested by the Company, immediately resign as a director of the Company and its Affiliates.  If such resignation is not received within 20 business days after the Executive actually receives 
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written notice from the Company requesting the resignation, the Executive will forfeit any right to receive any payments pursuant to this Agreement.
2.10Legal 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).
2.11Section 409A of the Internal Revenue Code.  
(a)This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A as separation pay due to an involuntary separation from service, as a short-term deferral, or under any other provision of Section 409A, shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a "separation from service" under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.
(b)Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his termination of employment is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A and the Executive is determined to be a "specified employee" as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on the Executive's death (the "Specified Employee Payment Date") . The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
(c)No acceleration of payments and benefits provided for in this Agreement shall be permitted, except that the Company may accelerate payment, if permitted by Section 409A, as necessary to allow the Executive to pay FICA taxes on amounts payable hereunder and additional taxes 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.  In no event shall the Executive, directly or indirectly, designate the calendar year of payment.
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(d)To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(i)the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(ii)any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(iii)any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
ARTICLE III
Nondisclosure and Proprietary Rights
3.1Confidential 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 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 the 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. 
3.2Nondisclosure of Confidential Information.  The Executive will hold in a fiduciary capacity for the benefit of the Company all Confidential Information obtained by the Executive during the 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, the 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 
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duplicates thereof and any notes or other records the Executive has prepared with respect thereto.  In the event that the provisions of any applicable law or the order of any court would require the Executive to disclose or otherwise make available any Confidential Information, the 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.
3.3Injunctive Relief; Other Remedies.  The Executive acknowledges that a breach by the Executive of Section 3.2 would cause immediate and irreparable harm to the Company for which an adequate monetary remedy does not exist; hence, the Executive agrees that, in the event of a breach or threatened breach by the Executive of the provisions of Section 3.2, the Company will be entitled to injunctive relief restraining the 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 the 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 the Executive.  In particular, the Executive acknowledges that the payments provided under Article II are conditioned upon the Executive fulfilling the nondisclosure agreements contained in this Article III.  If the 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 the Executive under Article II or, at the Company’s option, suspend payments otherwise due to the Executive under Article II during the period of such breach.  The 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 the 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. 
3.4Governing 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 the 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.
3.5Executive’s Understanding of this Article.  The Executive hereby represents to the Company that he has read and understands, and agrees to be bound by, the terms of this 
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Article III.  The 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 the Executive and the length of time it would take the Company to find and train a suitable replacement, and (b) the 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
4.1Binding 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 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.
4.2Notices.  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:
    16

    If to the Company, to:

    Stratus Properties Inc.
    212 Lavaca St.
    Suite 300
    Austin, Texas  78701
    Attention:  Chairman of Compensation Committee

    If to the Executive, to:

    [intentionally omitted]
    [intentionally omitted]    

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

4.3Governing 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.
4.4Withholding.  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.
4.5Amendment, Waiver.  No provision of this Agreement may be modified, amended or waived except by an instrument in writing signed by both parties.
4.6Severability.  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, the 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.
4.7Waiver 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.
4.8Remedies 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.
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4.9Company’s Reservation of Rights.  The 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 the 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.
4.10Prior 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.
4.11Counterparts.  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.

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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 E. Joseph                                         
James E. Joseph
Director and Chairman of the 
Compensation Committee of the
Board of Directors

Executive

/s/ William H. Armstrong III                               
William H. Armstrong III

Signature Page of Severance and Change of Control Agreement
between Stratus Properties Inc. and William H. Armstrong III
    19

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