Document:

Exhibit

STRATUS PROPERTIES INC.

PROFIT PARTICIPATION INCENTIVE PLAN

1.Purpose. This Profit Participation Incentive Plan (the “Plan”) is established to (a) enable Stratus Properties Inc., a Delaware corporation and its Subsidiaries (collectively, the “Company”) to attract and retain highly qualified employees and consultants who will contribute to the Company’s long-term success; (b) provide incentives that align the interests of key executives and other employees and consultants with those of the Company’s stockholders; and (c) promote the success of the Company’s business objectives, by providing economic incentives tied to the successful completion of the Company’s development projects.  
2.    Definitions. As used in this Plan, capitalized terms not otherwise defined shall have the meanings set forth in Appendix A.
3.    Administration.
3.1    General.  The Plan shall be administered by the Committee.  Subject to the terms of the Plan and Applicable Law, and in addition to any express powers conferred upon the Committee by the Plan or its charter, the Committee shall have the full power and authority to: (a) determine whether a particular development project should be excluded from the Plan; (b) designate Participants and their respective Participation Interests in each Approved Project; (c) determine the Profits Pool derived from each Capital Transaction or Valuation Event under the Plan; (d) interpret and administer the Plan, any Award Notice, and any other instrument or agreement relating to, or Award made under, the Plan; (e) establish, amend, suspend or waive such terms, rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (f) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.
3.2    Eligibility.  All officers, employees and consultants of the Company are eligible to be designated Participants in the Plan.  The Committee may designate Participants in the Plan by Approved Project, or may provide that individual officers, employees or consultants will participate in all Approved Projects.  
3.3    Effect of the Committee’s Determinations.  Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee or its delegee, may be made at any time and shall be final, conclusive, and binding on all persons, including the Company and each Participant.

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3.4    Delegation.  Subject to the terms of the Plan and Applicable Law, the Committee may delegate to one or more officers of the Company the authority, subject to such terms and limitations as the Committee shall determine, (a) to designate Participants, and (b) to grant and set the terms of, cancel, modify, waive rights with respect to, or alter, discontinue, suspend, or terminate Awards, provided such actions do not relate to grants to or Awards held by Participants who are Reporting Persons.  Notwithstanding the above, the Committee may not delegate the right to determine whether any particular development project should be excluded from the Plan or the right to determine any Profits Pool or Profit Participation Bonus amount under the Plan.
4.    Approved Projects; Determination, Payout and Conversion of Awards.
4.1    Designation of Approved Projects; Participation Interests.  
(a)    Following the Effective Date and in accordance with the Company’s standard procedures, Company management will initiate the approval process for new development projects to be undertaken by the Company by presenting to the Board a written investment memorandum summarizing the scope and details of the development project (each, an “Investment Memorandum”).  Following the Board’s review of the Investment Memorandum and approval of a development project, unless otherwise determined by the Committee, such development project shall become a new Approved Project under the Plan.  Within 60 days following the Board’s approval of the Approved Project, the Committee shall determine the Participants in the applicable Profits Pool and shall allocate the Participation Interests in that Approved Project, up to but not in excess of 100% in the aggregate, among the Participants.   
(b)    Following the allocation of Participation Interests in an Approved Project, an Award Notice shall be issued to each Participant, and such Award Notice shall identify the Approved Project and the Participant’s Participation Interest, and shall contain such other terms and conditions as the Committee may prescribe. 
(c)    In the event an Award is forfeited prior to either a Vesting Event or Valuation Event related to an Approved Project, the Committee may, in its sole discretion, allocate such Participant’s forfeited Participation Interest to one or more other Participants in that Profits Pool or one or more new Participants designated by the Committee.   
4.2    Vesting Event; Valuation Event.  
(a)    Except as otherwise provided herein or in an Award Notice, Participants shall vest in their Participation Interest with respect to a particular Approved Project on the date of a Capital Transaction with respect to the Approved Project (the “Vesting Event”).

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(b)    If a Capital Transaction has not occurred prior to the Valuation Event for an Approved Project, then, except as otherwise provided herein, all Awards with respect to that Approved Project shall convert into an equity award as described in Section 4.4.
(c)    Except as otherwise provided in Section 5, with respect to each Award, a Participant must be and remain an employee in good standing or a consultant of the Company from the Grant Date of the Award through the date of the Vesting Event or, if earlier, the date of grant of an equity-based award following a Valuation Event under Section 4.4, in order to be eligible to earn the Profits Participation Bonus or receive the equity-based award with respect to that Award, as applicable. 
(d)    Following the forfeiture of an Award pursuant to Section 5, the payout of an Award pursuant to Section 4.3, or the conversion of an Award upon the grant of an equity-based award pursuant to Section 4.4, as applicable, the Award shall be cancelled.
4.3    Determination and Payout of Profit Participation Bonuses Following a Vesting Event.  
(a)    Following the end of each calendar year (each, a “Transaction Year”), with respect to each Vesting Event that occurred during the Transaction Year, the Committee, in accordance with the terms of this Plan, shall determine (i) any Profits Pool generated by the applicable Approved Project, and (ii) any Profit Participation Bonus due with respect to outstanding, vested Awards held by the Participants in each such Profits Pool.  
(b)    Subject to Sections 4.3(c) and 5, the sum of all Profit Participation Bonuses due a Participant for all Vesting Events occurring during the Transaction Year (the “Total Bonus”) shall be paid in a lump sum cash payment to the Participant during the year following the Transaction Year as soon as practical following the Committee’s determination, but no later than March 15th. 
(c)    If a Participant is a Reporting Person of the Company at the time of payout of an Award, and if the Total Bonus to such Participant calculated under Section 4.3(a) and (b) for a given Transaction Year exceeds the Participant’s Cash Compensation Limit, the Total Bonus payable to the Participant shall be reduced such that it does not exceed the Cash Compensation Limit.  If permitted by the terms of the Company’s stockholder-approved stock incentive plans and subject to any limits in such plans, the difference between the Total Bonus calculated under Section 4.3(a) and (b) and the reduced Total Bonus paid to the Participant (the “Excess Value”) shall be converted to a number of stock-settled restricted stock units (“RSUs”) determined by dividing the Excess Value by the 12-month trailing average price of the Common Stock during the Transaction Year.  Except as provided below, the RSU grant shall be made on the date the Committee approves the lump sum cash payment (the “Effective Date of Grant”).  The RSU grant shall vest one year from the Effective Date of Grant, provided the Participant remains employed by or providing services to the Company or one of its Subsidiaries, unless the 

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Participant’s termination is by the Company without Cause or by the Participant with Good Reason, and shall be subject to such other terms and conditions as contained in an RSU agreement entered into between the Company and the Participant.  If the Company does not have sufficient shares available for grant under its stockholder-approved stock incentive plans, or if the terms of such plans do not permit the Committee to make all or part of the RSU grants contemplated in this Section 4.3(c), the Company shall seek stockholder approval to amend the outstanding stock incentive plan or adopt a new stock incentive plan as needed to support the grants.  If the Company is unable to obtain the stockholder approval needed for such actions by the end of the year following the applicable Transaction Year, then the Excess Value, or the portion thereof that could not be converted to a stock-settled RSU award, shall be delivered to the Participant in the form of a cash-settled RSU award, subject to the same one-year vesting schedule from the Effective Date of Grant described above.  Notwithstanding anything contained above, the limitation on cash payments described herein does not apply to Participants who are no longer employees or consultants to the Company at the time that a Total Bonus is paid.
(d)    Other than as set forth in Section 6.7, the Committee’s determinations shall be final and conclusive, and any changes to the valuation or calculation inputs arising subsequent to the Committee’s determination, whether positive or negative, shall not result in the increase or decrease of any Profit Participation Bonus previously paid.
4.4    Determination and Conversion of an Award Following a Valuation Event.  
(a)    No later than March 15th of the year following a Transaction Year, with respect to each Valuation Event that occurred during that Transaction Year, the Committee, in accordance with the terms of this Plan, shall determine (i) any Profits Pool generated by the applicable Approved Project in accordance with Section 4.4(b), and (ii) any Profit Participation Bonus amount attributable to each Participant with respect to outstanding Awards in each such Profits Pool. Notwithstanding the above, if a Capital Transaction with respect to an Approved Project occurs prior to the grant of RSUs described in Section 4.4(c), then the Award shall not be converted but shall be paid out according to Section 4.3 instead of this Section 4.4.
(b)    In order to determine the Profits Pool applicable to a Valuation Event, within a reasonable time after the Valuation Event, the Committee, on behalf of and at the expense of the Company, will engage a duly qualified and experienced independent M.A.I. commercial real estate appraiser (the “Appraiser”) to determine the fair market value of the Approved Project (the “Appraised Value”) as of the date of the Valuation Event (the “Valuation Date”).  Such Appraiser must have at least ten (10) years of experience in appraising real estate projects similar to the Approved Project in the county in which the Approved Project is located. The Appraised Value will be based on (i) a sale of the entire Approved Project owned by the Owner at the Valuation Date between a willing buyer and a willing seller, both of whom have full knowledge of the financial and other affairs of the Approved Project, and neither of whom is under any compulsion to sell or buy; (ii) the condition of the Approved Project on the Valuation 

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Date; (iii) the tenants, occupancy rates, and rental rates of the Approved Project on the Valuation Date; and (iv) the assumptions determined by the Appraiser, in the Appraiser’s opinion, for the economic conditions and future vacancy rates and lease rates for the Approved Project.  The Appraiser must deliver a written appraisal report for the Appraised Value to the Committee, and such appraisal report will be final and binding on all parties, absent manifest error.  The Appraised Value will be deemed to be the Value of the Project for the Valuation Event. 
(c)    Except as provided in Section 5, and if permitted by the terms of the Company’s stockholder-approved stock incentive plans and subject to any limits in such plans, the total Profit Participation Bonuses attributable to a Participant with respect to Valuation Events occurring in a Transaction Year (the “Total Valuation Bonus”) shall be converted to a number of stock-settled RSUs determined by dividing the Total Valuation Bonus by the 12-month trailing average price of the Common Stock during the Transaction Year.  The RSU grant shall vest in equal annual installments over a three-year period from the date of grant, provided the Participant remains employed by or providing services to the Company or one of its Subsidiaries, unless the termination is by the Company without Cause or by the Participant with Good Reason, and shall be subject to such other terms and conditions as contained in an RSU agreement entered into between the Company and the Participant.  If the Company does not have sufficient shares available for grant under its stockholder-approved stock incentive plans, or if the terms of such plans do not permit the Committee to make all or part of the RSU grants contemplated in this Section 4.4(c), the Company shall seek stockholder approval to amend the outstanding stock incentive plan or adopt a new stock incentive plan as needed to support the grants.  If the Company is unable to obtain the stockholder approval needed for such actions by the end of the year following the applicable Transaction Year, then the Total Valuation Bonus, or the portion thereof that could not be converted to a stock-settled RSU award, shall be delivered to the Participants in the form of cash-settled RSU award, subject to the same three-year vesting schedule described above.  
(d)    Other than as set forth in Section 6.7, the Committee’s determinations shall be final and conclusive, and any changes to the valuation or calculation inputs arising subsequent to the Committee’s determination, whether positive or negative, shall not result in the increase or decrease of any RSU award previously granted.
5.    Effect of Termination of Employment or Service.
(a)If the Participant ceases to be an employee or consultant of the Company (the “Termination”) prior to a Vesting Event with respect to an Award, then, except as set forth in Section 5(b) of this Plan, such unvested Award shall immediately be forfeited on the date of such Termination.  Termination of employment or service shall have no effect on any vested Awards, which shall pay out according to the terms of this Plan and the applicable Award Notice. 
(b)Notwithstanding the foregoing, if a Participant’s employment or service is terminated prior to a Vesting Event with respect to an Approved Project, and such Termination is 

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by the Company without Cause or by the Participant with Good Reason, then outstanding, unvested Awards shall not be forfeited but shall remain outstanding and be paid out in accordance with Section 4.3 or 4.4, as applicable; provided, however, that payment of any Total Valuation Bonus pursuant to Section 4.4 shall be made in a lump sum cash payment prior to March 15th of year following the applicable Transaction Year.
6.    General Terms and Conditions.
6.1    Amendment or Discontinuance of the Plan.  The Board or the Committee may amend, suspend or discontinue the Plan at any time; provided, however, that no such amendment may materially impair, without the consent of all affected Participants, an Award previously granted to such Participants.
6.2    No Right to Continued Employment or Service.  Nothing in the Plan or in any Award Notice shall confer upon any person the right to continue in the employment or service of the Company or affect the right of the Company to terminate the employment or service of any Participant.
6.3    No Rights in any Approved Project.  Nothing in this Plan shall be construed to grant or to vest in any Participant title in or to any Approved Project or any Owner, nor shall any Participant, solely by virtue of an Award made hereunder, have any right to approve, disapprove, or participate in any decision with respect to the ownership, management, financing, leasing, sale or conveyance of an Approved Project or any Owner. 
6.4    No Right to Award.  Unless otherwise expressly set forth in an employment or other agreement, no employee or consultant shall have any right to an Award under the Plan until named as a Participant in an Award Notice. Participation in the Plan with respect to one Approved Project does not connote any right to become a Participant in the Plan with respect to any other Approved Projects.
6.5    Withholding.  The Company shall have the right to withhold from any Profit Participation Bonus or other award under this Plan, any federal, state or local income and/or payroll taxes required by law to be withheld and to take such other action as the Committee may deem advisable to enable the parties to satisfy obligations for the payment of withholding taxes and other tax obligations relating to a Profit Participation Bonus or other award.
6.6    Unfunded Status.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between or among the Company, any Owner and any Participant, beneficiary or legal representative or any other person. To the extent that a person becomes eligible to receive a Profit Participation Bonus or RSU award under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be 

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established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. No Owner, without the prior express written consent of such Owner, will be obligated or liable to make any payments to any Participant under the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA).
6.7    Clawback.
(a)If a Participant engages in grossly negligent conduct or intentional misconduct that either (i) requires the Company’s financial statements to be restated at any time beginning on the Grant Date and ending on the first (1st) anniversary of the payment of any Profit Participation Bonus or (ii) results in an increased payout of any Award, then the Committee, after considering the costs and benefits to the Company of doing so, may seek recovery for the benefit of the Company of the portion of any Profit Participation Bonus, including any amount converted to an RSU award, that is greater than it would have been if calculated based on the restated financial statements or absent the increase described in part (ii) above (the “Overpayment”).  All determinations regarding the amount of such recovery shall be made solely by the Committee in good faith.
(b)The Awards granted hereunder are also subject to any clawback policies the Company may adopt in order to conform to the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any resulting rules issued by the SEC or the exchange on which the Company’s shares are traded.
(c)If the Committee determines that a Participant owes any amount to the Company under Section 6.7 (a) or (b) above, the Participant shall return to the Company the Overpayment, without interest, in cash or such other form as determined by the Committee.  The Company may also, to the fullest extent permitted by Applicable Law, deduct such amount owed from any amounts the Company owes the Participant from time to time for any reason (including without limitation amounts owed to the Participant as salary, wages, reimbursements or other compensation, fringe benefits, retirement benefits or vacation pay) or cancel any RSU award granted pursuant to this Plan related to an Overpayment. 
6.8    Section 409A. The Plan is intended to comply with Section 409A to the U.S. Internal Revenue Code of 1986, as amended from time to time (“Section 409A”) to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless any Applicable Law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following a Participant's Termination shall instead be paid on the first payroll date 

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after the six-month anniversary of the Participant’s Termination (or the Participant's death, if earlier). Notwithstanding the foregoing, none of the Company, the Committee or the Board shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A and none of the Company, the Committee or the Board will have any liability to any Participant for such tax or penalty.
6.9    Non-transferability.  A Participant's rights and interests under the Plan, including any Award previously made to such Participant or any Profit Participation Bonus payable under the Plan may not be assigned, pledged, or transferred, except in the event of the Participant's death, to a designated beneficiary as set forth herein, or in the absence of such designation, by will or the laws of descent or distribution.
6.10    Severability.  In the event that any provision of the Plan shall be considered illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, but shall be fully severable, and the Plan shall be construed and enforced as if such illegal or invalid provision had never been contained therein.
6.11    Non-exclusive.  Nothing in the Plan shall limit the authority of the Company, the Board or the Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.  Further, the Committee, in its discretion, may consider the level of payouts under this Plan when evaluating other forms of compensation payable to Participants.
6.12    Successors.  All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding upon any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the assets of the Company.
6.13    Headings. The titles and headings used in the Plan are intended for convenience only and shall not be construed as in any way affecting or modifying the text of this Plan, which text shall control.

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Stratus Properties Inc.
Profit Participation Incentive Plan

APPENDIX A: Definitions

“Affiliate” means any person or corporation or other entity directly or indirectly controlled by another person, corporation or entity.
“Applicable Law” means any Applicable Law (including common law), statute, code, regulation, rule, or ordinance of any city, county, state, or federal government or other governmental authority, agency, or instrumentality.
“Approved Project” means any Company development project designated by the Committee, and, following the Effective Date, those development projects approved by the Board pursuant to an Investment Memorandum presented to the Board, unless specifically excluded from this Plan by the Committee.
“Award” means any Participation Interests associated with an Approved Project that are granted pursuant to this Plan.
“Award Notice” means a notice of an Award, identifying the applicable Approved Project and setting forth the Participant’s Participation Interest in the applicable Profits Pool.  Award Notices shall be issued for each Approved Project in the form attached hereto as Appendix B, which form may be revised by the Committee at any time. 
“Board” means the Board of Directors of Stratus Properties Inc.
“Capital Contribution” means the contribution or loan of cash or property to the capital of Owner by or on behalf of the Company.
“Capital Transaction” means the Sale or Exchange of an Approved Project as approved by the Board.
“Cash Equivalent” means cash, negotiable instruments due on demand, readily marketable securities or demand deposit accounts.
“Cash Compensation Limit” means four times (4x) a Participant’s annual base salary as of the last day of a Transaction Year.  
“Cause” means any of the following: (i) the commission by the Participant of an illegal act (other than traffic violations or misdemeanors punishable solely by the payment of a fine); (ii) the engagement of the Participant in dishonest or unethical conduct, as determined by the Committee or its designee, including but not limited to violations of the Company’s Ethics and 

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Business Conduct Policy; (iii) the commission by the Participant of any fraud, theft, embezzlement, or misappropriation of funds; (iv) the failure of the Participant to carry out a directive of such Participant’s superior, employer or principal; or (v) the breach of the Participant of the terms of such Participant’s engagement.
“Committee” means the committee of the Board appointed by the Board to administer the Plan.  Unless and until determined otherwise by the Board, the Committee shall be the Compensation Committee of the Board. 
“Effective Date” means July 11, 2018.
“Equity” means (a) the aggregate amount of all costs and expenses incurred by the Company for and on behalf of the Owner or Capital Contributions made by the Company to the Owner to purchase, entitle, develop, improve, own, finance, operate, lease, market, and sell the Approved Project less (b) all sums distributed by Owner to the Company from Capital Transactions.
For any project in which the land related to such project was owned by the Company or a wholly-owned subsidiary of the Company before such project becomes an Approved Project under this Plan (a “Pre-owned Project”), the Equity value will be as set forth in the Investment Memorandum presented to the Board for approval of such project.  The Investment Memorandum will include the initial cost basis in the land (as allocated and determined by the Company), the imputed value of such land (as determined by the Company, unless otherwise determined by the Committee), and the additional development or other costs incurred to date for such land and the related project, which in the aggregate will be deemed to be the Equity as of the date the project becomes an Approved Project.  The following is a summary example of the calculations of the initial Equity for a Pre-owned Project:
		
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	initial cost basis in land:                    $2,000,000

		
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	imputed value of land and related rights:            $4,000,000

		
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	additional development or other costs to date

not included in initial cost basis:            $1,500,000
subtotal Equity:                    $7,500,000
“Exchange” means a bona fide transaction with a party that is not an Affiliate of the Company in which the consideration, in whole or in part, to the Company for its transfer or conveyance of an Approved Project is the transfer or conveyance to the Company of an interest in any property other than a Cash Equivalent. 
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Good Reason” means either of the following (without Participant’s express written consent): (i) a material diminution in Participant’s base salary or (ii) the Company’s requiring Participant to be based at any office or location more than 35 miles from Participant’s principal 

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office or location. Notwithstanding the foregoing, Participant shall not have the right to terminate Participant’s employment hereunder for Good Reason unless (a) within 30 days of the initial existence of the condition or conditions giving rise to such right Participant provides written notice to the Company of the existence of such condition or conditions, and (b) 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, Participant must terminate Participant’s employment with the Company within a reasonable period of time, not to exceed 30 days, following the end of the Cure Period.  The foregoing to the contrary notwithstanding, if at any time the Participant is subject to an effective employment or change of control agreement with the Company or an Affiliate of the Company, then, in lieu of the foregoing definition, “Good Reason” shall at that time have such meaning as may be specified in such other agreement.
“Grant Date” shall mean the date the Committee or its delegee allocates a Participation Interest to a Participant in the Plan, as reflected in the Award Notice.
“Net Company Proceeds” means,
(a)    Capital Transaction.  With respect to a Capital Transaction, the amount of Net Owner Proceeds received by the Company as a liquidating distribution from the Owner pursuant to the applicable organizational agreement(s) (e.g., company agreement, operating agreement, or partnership agreement) governing the management and ownership of the Owner less any reserves established for future obligations or liabilities (known, unknown, or contingent) as determined by the Company (provided that the Company will not double count any reserves established by the Owner in the calculation of Net Owner Proceeds).
(b)    Valuation Event.  With respect to a Valuation Event, the amount of the Net Owner Proceeds hypothetically expected to be received by the Company as a liquidating distribution from the Owner pursuant to the applicable organizational agreement(s) (e.g., company agreement, operating agreement, or partnership agreement) governing the management and ownership of the Owner less any reserves established for future obligations or liabilities (known, unknown, or contingent) as determined by the Company (provided that the Company will not double count any estimated reserves to be established by the Owner in the calculation of Net Company Proceeds).
(c)    For clarity, any amounts paid to the Company or its Affiliates by the Owner or any other party for services rendered for the Approved Project, including, without limitation, development management fees, asset management fees, sales or leasing commissions, property management fees, or similar fees shall be treated as third-party expenses and shall not be included in the term “Net Company Proceeds.”  
“Net Company Profits” means,

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(a)    Capital Transaction.  With respect to a Capital Transaction, the amount of Net Company Proceeds remaining after the Company has received the full amount of (i) the Preferred Return and (ii) the Equity.
(b)    Valuation Event.  With respect to a Valuation Event, the amount of Net Company Proceeds hypothetically remaining after the Company has received the full amount of (i) the Preferred Return and (ii) the Equity.
“Net Owner Proceeds” means,
(a)    Capital Transaction.  With respect to a Capital Transaction, the Value of the Project less (i) all closing costs associated with the Capital Transaction including, without limitation, brokerage fees, recording fees, surveying and engineering fees, title insurance premiums and charges, and attorneys’ fees; (ii) any amounts applied in connection with the repayment of any Project Loan associated with the Approved Project; (iii) any amounts the Owner (or an Affiliate) is required to pay, or reasonably expected to be required to pay, for post-closing obligations in connection with such Capital Transaction; (iv) any reserves established for future obligations or liabilities (known, unknown, or contingent) as determined by the Owner; and (v) any other expenses associated with the Capital Transaction or the Approved Project which the Committee, in its sole discretion, determines should be deducted.
(b)    Valuation Event.  With respect to a Valuation Event, the Value of the Project (as determined by the Appraiser) less estimated amounts, as determined by the Committee in its sole discretion, for each of the items described in (i) through (v) above for a Capital Transaction.
“Owner” means the owner of an Approved Project, as identified in the Award Notice, and as may be changed or transferred to an Affiliate by the Company at any time.  For clarity, the Company does not currently own any Approved Project directly, but rather the Approved Projects are currently owned, and expected to be owned, by Owners that are either (i) wholly-owned subsidiaries of the Company or (ii) entities in which the Company or an Affiliate owns less than all of the ownership interests.
“Participants” means each person selected by the Committee to receive a Participation Interest with respect to a particular Approved Project.
“Participation Interest” means each Participant’s share of the Profits Pool associated with an Approved Project, as determined by the Committee and set forth in the Award Notice.
“Preferred Return” means a cumulative return on the outstanding Equity at the rate of ten percent (10%) per annum, compounded quarterly.  The Preferred Return will be calculated in the manner of interest on the initial daily balance (based on a 365-day year) of unreturned Equity and cumulative unreturned Preferred Return and compounded quarterly based on the quarter-end balance of unreturned Equity and cumulative unreturned Preferred Return. The Preferred Return will begin to accrue on Equity when costs (including pursuit costs) are initially paid on any 

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project that becomes an Approved Project; provided, however, the Preferred Return on Equity for any Pre-owned Project will be begin to accrue on the date set forth in the definition of Equity.
“Profits Pool” means 25% of any Net Company Profits either (i) derived from a Capital Transaction or (ii) calculated upon a Valuation Event. 
“Profit Participation Bonus” means the total cash payment, if any, payable to a Participant pursuant to an Award based upon such Participant’s Participation Interest in a Profits Pool. 
“Reporting Person” means an officer, director or ten percent stockholder of the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange Act.
“Sale” means the bona fide sale and conveyance of all of an Approved Project to a third party that is not an Affiliate of the Company for a Cash Equivalent. 
“Subsidiary” means (i) any corporation or other entity in which Stratus Properties Inc. possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which Stratus Properties Inc. has a direct or indirect economic interest that is designated as a Subsidiary by the Committee.
“Valuation Event” with respect to a particular Approved Project means the third (3rd) anniversary of the date such Approved Project is substantially complete, as evidenced by either (A) the issuance of a certificate of occupancy, or similar governmental permit or certificate, covering all shell buildings to be constructed by the Owner (or an Affiliate) shown on the site plan for the Approved Project, or (B) the issuance of a substantial completion certificate for substantially all of the improvements shown on the site plan for the Approved Project by the architect of record.
“Value of the Project” means, for each Approved Project: (i) in the case of a Capital Transaction, the total gross purchase price paid to the Owner for or in consideration of a Capital Transaction; and (ii) in the case of a Valuation Event, the Appraised Value as determined in accordance with Section 4.4(b) of the Plan.  For purposes of this definition and with respect to any Capital Transaction, the total gross purchase price or other amounts paid shall include the value of any and all consideration if, as, and when actually delivered to the Owner in connection with such Capital Transaction, regardless of the form of such consideration.  Without limiting the foregoing, for the purpose of determining the total gross purchase price paid, (a) liabilities assumed (including, without limitation, taxes and assessments and other indebtedness owed by the Owner and assumed by the transferee of the Approved Project in connection with the Capital Transaction) shall be deemed to be cash on a dollar for dollar basis and (b) any property received in the Capital Transaction other than Cash Equivalent shall be deemed to be cash equal to the fair market value of such property, as determined by the Committee.

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Stratus Properties Inc.
Profit Participation Incentive Plan

APPENDIX B: Form of Award Notice

Participant:        
Grant Date:            
Name of Approved Project:     
Owner:            
Participation Interest:                 
Congratulations! We are providing this Award Notice (this “Notice”) to advise you that you have been granted an Award under the terms and conditions of the Stratus Properties Inc. Profit Participation Incentive Plan (the “Plan”), a copy of which is attached hereto.  Subject to the terms and conditions of the Plan, this Award provides you with the opportunity to share in any profits earned above a certain level in connection with the Approved Project referenced above.  Please refer to the attached Plan for more information about the terms and conditions of your Award, including the forfeiture conditions applicable to the Award.  All terms that are capitalized but not defined in this Notice have the meaning ascribed to them in the Plan.  
Stratus Properties Inc.
____________________________________
By: ____________________

Participant Confirmation and Acknowledgement
By my signature below, I understand, agree, and acknowledge the following: 
1.I have received a copy of the Plan and understand the Plan’s terms of participation, including but not limited to the following terms: (a) that I must remain employed with or continue providing services to Stratus Properties Inc. and/or its Subsidiaries (the “Company”) for an extended period of time to receive payment, if any, of any Award under the Plan; (b) that my receipt of this Award does not constitute an entitlement to selection as a Participant to receive any future Awards under the Plan; and (c) that payments in respect of Awards under the Plan are subject to clawback under the circumstances described in Section 6.7 of the Plan. 

2.My participation in the Plan does not give me any rights to continue in the Company’s employment or service and does not interfere with the Company’s rights, subject to Applicable Laws, to terminate my employment or service at any time with or without cause.  
3.The decisions or interpretations of the Committee with respect to any questions arising under the Plan or this Notice are binding, conclusive and final.
PARTICIPANT:

    
Print Name:    
Date:Exhibit

Exhibit 10.1

EP ENERGY CORPORATION
2014 OMNIBUS INCENTIVE PLAN
PERFORMANCE SHARE GRANT NOTICE
Pursuant to the terms and conditions of the EP Energy Corporation  2014 Omnibus Incentive Plan, as amended from time to time (the “Plan”), EP Energy Corporation (the “Company”) hereby grants to the individual listed below (“you” or “Employee”) an award (this “Award”) of Performance Shares (the “PSUs”) subject to the terms and conditions set forth herein and in the Performance Share Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference.  Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
	
				
	Employee:
	[___________________________________]

	Date of Grant:
	[___________]

	Threshold PSUs:
	[___________] PSUs

	Performance Period:
	November 1, 2017 (the “Performance Period Commencement Date”) through October 31, 2021 (the “Performance Period End Date”) 

	Vesting Schedule:
	Except as expressly provided in Section 3(b) of the Agreement, the PSUs shall become vested in accordance with the schedule set forth in the following table, so long as you remain continuously employed by the Company from the Date of Grant through each vesting date set forth below:

	 
	Vesting Date
	 
	Portion of PSUs That Become Vested

	 
	First Anniversary of the Performance Period Commencement Date
	 
	20%

	 
	Second Anniversary of the Performance Period Commencement Date
	 
	20%

	 
	Third Anniversary of the Performance Period Commencement Date
	 
	20%

	 
	Fourth Anniversary of the Performance Period Commencement Date
	 
	20%

	 
	Second Anniversary of the Performance Period End Date
	 
	20%

	 
	 
	 
	 

	Earning of PSUs:

	Subject to the Agreement, the Plan and the other terms and conditions set forth herein, the PSUs shall become earned in the manner set forth below.  The number of PSUs, if any, that become earned in the Performance Period will be determined in accordance with the following table (the “Performance Goals”):

	 
	Average Stock Price
	 
	PSUs Earned

	Below Threshold
	Less than $5.00
	 
	—

	Threshold
	At least $5.00, but less than $6.00
	 
	100.00%

	 
	At least $6.00, but less than $7.00
	 
	125.00%

	 
	At least $7.00, but less than $8.00
	 
	178.57%

	 
	At least $8.00, but less than $9.00 
	 
	312.50%

	 
	At least $9.00, but less than $10.00
	 
	416.67%

	 
	At least $10.00, but less than $12.00
	 
	500.00%

	
				
	 
	At least $12.00, but less than $14.00
	 
	833.33%

	Maximum
	$14.00 or greater
	 
	1,041.67%

	 
	 
	 
	 

	 
	As used herein, “Average Stock Price” means the highest average closing price per share of the Company’s Common Stock (as reported on the New York Stock Exchange composite tape) during any period of 90 consecutive days on which the New York Stock Exchange is open for trading during the Performance Period.

	Settlement Schedule:
	Subject to the Agreement, the Plan and the other terms and conditions set forth herein, the PSUs earned during the Performance Period that have become vested shall be settled in accordance with Section 6 of the Agreement on the schedule set forth in the following table: 

	 
	Settlement Date
	 
	Cumulative Portion of PSUs Granted Hereunder That Become Settled

	 
	Performance Period End Date
	 
	20%

	 
	First Anniversary of the Performance Period End Date
	 
	40%

	 
	Second Anniversary of the Performance Period End Date
	 
	100%

By your electronic acceptance/signature, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Performance Share Grant Notice (this “Grant Notice”).  You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice.  You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Plan Administrator regarding any questions or determinations arising under the Agreement, the Plan or this Grant Notice, which are incorporated herein by reference.  
In addition, you are consenting to receive documents with respect to the Plan and the PSUs granted hereunder by means of electronic delivery, provided that such delivery complies with the rules, regulations, and guidance issued by the Securities and Exchange Commission and any other applicable government agency.  This consent shall be effective for the entire time that you are a participant in the Plan.

	
		
	 
	EP Energy Corporation

EXHIBIT A
PERFORMANCE SHARE AGREEMENT
This Performance Share Agreement (this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached (the “Date of Grant”) by and between EP Energy Corporation, a Delaware corporation (the “Company”), and [__________________] (“Employee”).  
1.Definitions.  Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.  As used herein, the following terms have the meanings set forth below:
(a)    “Certificate of Incorporation” means the Second Amended and Restated Certificate of Incorporation of the Company, as amended from time to time.
(b)    “Change in Control Protection Period” means the one-year period following the consummation of a Change in Control.
(c)     “Employment Agreement” means the employment agreement between Employee and the Company.
(d)    “Sponsor Sale” means a Subsequent Sale (as defined in the Certificate of Incorporation) by one or more of the Sponsors.
(e)    “Sponsors” means, collectively, the Apollo Stockholder and the Principal Stockholders, as such terms are defined in the Certificate of Incorporation.
2.    Award.  Effective as of the Date of Grant, the Company hereby grants to Employee the number of PSUs set forth in the Grant Notice on the terms and conditions set forth in the Grant Notice, this Agreement and the Plan, which is incorporated herein by reference as a part of this Agreement.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.  To the extent earned, each PSU represents the right to receive one share of Stock (“Common Stock”), subject to the terms and conditions set forth in the Grant Notice, this Agreement and the Plan.  Unless and until the PSUs have become earned in the manner set forth in the Grant Notice and this Agreement, Employee will have no right to receive any Common Stock or other payments in respect of the PSUs.  Prior to settlement of this Award, the PSUs and this Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.
3.    Vesting of PSUs.  
(a)    Except as otherwise set forth in this Section 3 below, the PSUs shall vest in accordance with the vesting schedule set forth in the Grant Notice.  
(b)    Notwithstanding anything in the Grant Notice, this Agreement or the Plan to the contrary:

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(i)    If Employee’s employment with the Company terminates as a result of Employee’s death or Disability (as defined in the Employment Agreement), then, provided that Employee (or, if applicable, Employee’s estate) executes within the time provided to do so (and does not revoke within any time provided to do so) a release of claims in a form acceptable to the Plan Administrator, the vesting of 50% of the PSUs, if any, that remain unvested will accelerate automatically on the date of such termination without any further action by the Company or any other person; provided, however, that such vested PSUs (and all other PSUs granted hereunder, if any, that have become vested) shall remain subject to the terms and conditions set forth in the Grant Notice and this Agreement, including Sections 5, 6 and 10 below; 
(ii)    If Employee’s employment with the Company terminates before or after a Change in Control Protection Period as a result of (A) the Company’s termination of Employee’s employment without Cause (as defined in the Employment Agreement) or (B) Employee’s resignation for Good Reason (as defined in the Employment Agreement), then if such termination occurs (x) prior to the Performance Period End Date or (y) after the first anniversary of the Performance Period End Date and prior to the second anniversary of the Performance Period End Date, any PSUs remain unvested as of the date of such termination, provided that Employee executes within the time provided to do so (and does not revoke within any time provided to do so) a release of claims in a form acceptable to the Plan Administrator, the vesting of a portion of the PSUs granted hereunder equal to the Specified Acceleration Percentage will accelerate automatically on the date of such termination without any further action by the Company or any other person; provided, however, that such vested PSUs (and all other PSUs granted hereunder, if any, that have become vested) shall remain subject to the terms and conditions set forth in the Grant Notice and this Agreement, including Sections 5, 6 and 10 below.  As used herein, “Specified Acceleration Percentage” means the product of (I) 5% multiplied by (II) the number of complete calendar quarters that have elapsed in the calendar year that includes the date of Employee’s termination of employment prior to the date of such termination; and
(c)    If, during a Change in Control Protection Period, Employee’s employment with the Company terminates as a result of (i) the Company’s termination of Employee’s employment without Cause or (ii) Employee’s resignation for Good Reason, then, provided that Employee executes within the time provided to do so (and does not revoke within any time provided to do so) a release of claims in a form acceptable to the Plan Administrator, (A) if the Performance Period has not ended, the date of such termination of employment shall be deemed to be the Performance Period End Date, (B) all PSUs that remain unvested as of the date of such termination, if any, will accelerate automatically on the date of such termination and become vested without any further action by the Company or any other person, and (C) the date of such termination shall be deemed to be a Settlement Date; provided, however, that such vested PSUs (and all other PSUs granted hereunder, if any, that have become vested) shall remain subject to the terms and conditions set forth in the Grant Notice and this Agreement, including Sections 5, 6 and 10 below. 

A-2

4.    Forfeitures Upon Termination of Employment.
(a)    If Employee’s employment with the Company terminates as a result of the Company’s termination of Employee’s employment for Cause, then on the date of such termination, Employee shall forfeit without consideration all of the PSUs (including the PSUs that remain unvested and the PSUs that have become vested) and all rights arising from such PSUs and from being a holder thereof. 
(b)    If Employee’s employment with the Company terminates as a result of Employee’s resignation without Good Reason, including, if applicable, a termination of Employee’s employment as a result of the expiration of the term of the Employment Agreement due to Employee providing notice of non-renewal of such agreement, then, on the date of such termination, Employee shall forfeit without consideration (i) all PSUs that remain unvested and (ii) 50% of the PSUs that have become vested and all rights arising from such PSUs and from being a holder thereof.
(c)    If Employee’s employment with the Company terminates for any reason other than as set forth in Section 4(a) or 4(b), Employee shall forfeit without consideration all of the PSUs that remain unvested (after giving effect to any accelerated vesting pursuant to Section 3(b)) and all rights arising from such PSUs and from being a holder thereof.
(d)    The forfeiture of PSUs pursuant to this Section 4 shall occur immediately and automatically (without further action of the Company or any other person) upon the termination giving rise to such forfeitures.
5.    Earning of PSUs.  Following the end of the Performance Period, the Plan Administrator will determine the level of achievement of the Performance Goals for the Performance Period.  The number of PSUs, if any, that actually become earned for the Performance Period will be determined by the Plan Administrator in accordance with the Grant Notice (and any PSUs that do not become so earned shall be automatically forfeited).  Unless and until the PSUs have become earned and been settled in accordance with Section 6, Employee will have no right to receive any dividends or other distributions with respect to the PSUs.  
6.    Settlement of PSUs.  As soon as administratively practicable following each Settlement Date, but in no event later than 60 days following such Settlement Date, Employee (or Employee’s permitted transferee, if applicable) shall be issued a number of shares of Common Stock equal to the number of PSUs subject to this Award that have become (i) vested in accordance with the Grant Notice and Section 3, as applicable, and (ii) earned based on the level of achievement of the Performance Goals as determined by the Plan Administrator in accordance with Section 5.  Any fractional PSU that becomes earned hereunder shall be rounded to the nearest whole share at the time shares of Common Stock are issued in settlement of such PSU.  No fractional shares of Common Stock, nor the cash value of any fractional shares of Common Stock, will be issuable or payable to Employee pursuant to this Agreement.  All shares of Common Stock issued hereunder shall be delivered by entering such shares in book-entry form.  The value of shares of Common Stock shall not bear any interest owing to the passage of time.  Neither this Section 6 nor any action taken pursuant to or in accordance with this Agreement shall be construed to create a trust or a funded or secured obligation of any kind.

A-3

7.    Dividend Equivalent Rights.  Each PSU subject to this Award is hereby granted in tandem with a corresponding dividend equivalent.  Each dividend equivalent granted hereunder shall remain outstanding from the Date of Grant until the earlier of the settlement or forfeiture of the PSU to which it corresponds.  If the Company pays a cash dividend in respect of its outstanding Stock and, on the record date for such dividend, Employee holds PSUs granted pursuant to this Agreement that have not vested and been settled, the Company shall credit to an account maintained by the Company for Employee’s benefit an amount equal to the cash dividends Employee would have received if Employee were the holder of record, as of such record date, of the number of shares of Common Stock related to the portion of the PSUs that have not been settled or forfeited as of such record date.  Such account is intended to constitute an “unfunded” account, and neither this Section 7 nor any action taken pursuant to or in accordance with this Section 7 shall be construed to create a trust of any kind.  Any dividend equivalent will be subject to the same vesting schedule as the PSUs to which it relates and will be paid to Employee, in cash, on the date that the PSU to which it relates is settled in accordance with Section 6.  Employee shall not be entitled to receive any interest with respect to the payment of dividend equivalents.  Any dividend equivalent that relates to a PSU that (a) does not become vested or (b) becomes vested and is subsequently forfeited shall be forfeited at the same time the related PSU is forfeited.
8.    Rights as Stockholder.  Neither Employee nor any person claiming under or through Employee shall have any of the rights or privileges of a holder of shares of Common Stock in respect of any shares that may become deliverable hereunder unless and until certificates representing such shares have been issued or recorded in book entry form on the records of the Company or its transfer agents or registrars, and delivered in certificate or book entry form to Employee or any person claiming under or through Employee.
9.    Tax Withholding.  Pursuant to Section 17.8 of the Plan, the Plan Administrator shall have the power and right to deduct or withhold, or require Employee to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes (including Employee’s FICA obligations) required by law to be withheld with respect to this Award.
10.    Restrictions on Transfer.  
(a)    None of the PSUs, dividend equivalents or any interest or right therein shall be (i) sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the shares of Common Stock underlying the PSUs have been issued, and all restrictions applicable to such shares have lapsed, or (ii) liable for the debts, contracts or engagements of Employee or his or her successors in interest.  Except to the extent expressly permitted by the preceding sentence, any purported sale, pledge, assignment, transfer, attachment or encumbrance of the PSUs, dividend equivalents or any interest or right therein shall be null, void and unenforceable against the Company and its affiliates.
(b)    Until the earlier to occur of (i) the third anniversary of the Performance Period End Date or (ii) the date on which the Sponsors hold less than 15% of the shares of Common Stock they held on the Date of Grant, shares of Common Stock issued hereunder may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution except (1) with the prior approval of the Board, (2) to satisfy tax withholding obligations as provided 

A-4

in Section 9, or (3) on a pro-rata basis with the Sponsors in the event of a Sponsor Sale following the Performance Period End Date in which the Apollo Stockholder participates (subject to cutback, if applicable, on terms substantially similar to the terms that apply to other holders of Stock that participate in such transaction); provided, that in the event the Apollo Stockholder participates in a Sponsor Sale prior to the Performance Period End Date, the shares of Common Stock sold by the Apollo Stockholder in such Sponsor Sale shall be taken into account for purposes of determining Employee’s pro-rata participation pursuant to this clause (3) in a Sponsor Sale that occurs after the Performance Period End Date.
11.    Execution of Receipts.  Any issuance or transfer of shares of Common Stock or other property to Employee or Employee’s legal representative, heir, legatee or distributee, in accordance with this Agreement shall be in full satisfaction of all claims of such person hereunder.  As a condition precedent to such payment or issuance, the Company may require Employee or Employee’s legal representative, heir, legatee or distributee to execute a receipt therefor in such form as it shall determine appropriate.
12.    No Right to Continued Employment or Awards.  Employee acknowledges that nothing in this Award or the Plan constitutes an express or implied promise of continued engagement as an employee.  The grant of the PSUs and dividend equivalents is a one-time benefit and does not create any contractual or other right to receive a grant of Awards or benefits in lieu of Awards in the future.
13.    Notices.  Any notices or other communications provided for in this Agreement shall be sufficient if in writing.  In the case of Employee, such notices or communications shall be effectively delivered if hand delivered to Employee at Employee’s principal place of employment or if sent by registered or certified mail to Employee at the last address Employee has filed with the Company.  In the case of the Company, such notices or communications shall be effectively delivered if sent by registered or certified mail to the Company at its principal executive offices.
14.    Agreement to Furnish Information.  Employee agrees to furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirement imposed upon the Company by or under any applicable statute or regulation.
15.    Entire Agreement; Amendment.  This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to the PSUs and dividend equivalents granted hereby; provided ̧ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment and/or severance agreement between the Company (or an affiliate or other entity) and Employee in effect as of the date a determination is to be made under this Agreement.  Without limiting the scope of the preceding sentence, except as provided therein, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect.  The Plan Administrator may, in its sole discretion, amend this Agreement from time to time in any manner that is not inconsistent with the Plan; provided, however, that except as otherwise provided in the Plan or this Agreement, any such amendment that (a) materially reduces the rights of Employee or (b) adversely affects the economic rights of Employee under this Award shall be 

A-5

effective only if it is in writing and signed by both Employee and an authorized officer of the Company. 
16.    Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to conflicts of law principles thereof.
17.    Successors and Assigns.  The Company may assign any of its rights under this Agreement without Employee’s consent.  This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth herein and in the Plan, this Agreement will be binding upon Employee and Employee's beneficiaries, executors, administrators and the person(s) to whom the PSUs and dividend equivalents may be transferred by will or the laws of descent or distribution.
18.    Clawback.  Notwithstanding any provision in this Agreement, the Grant Notice or the Plan to the contrary, to the extent required by (a) applicable law, including the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, any Securities and Exchange Commission rule or any applicable securities exchange listing standards and/or (b) the Company’s clawback policy and any other policy that may be adopted or amended by the Board from time to time, all shares of Common Stock issued hereunder shall be subject to forfeiture, repurchase, recoupment and/or cancellation to the extent necessary to comply with such law(s) and/or policy.
19.    Counterparts. The Grant Notice may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Delivery of an executed counterpart of the Grant Notice by facsimile or pdf attachment to electronic mail shall be effective as delivery of a manually executed counterpart of the Grant Notice.
20.    Severability.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of such provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. 
21.    Headings; References; Interpretation.  All Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof.  The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All references herein to Sections shall, unless the context requires a different construction, be deemed to be references to the Sections of this Agreement.  All references to “including” shall be construed as meaning “including without limitation.”  Unless the context requires otherwise, all references herein to a law, agreement, instrument or other document shall be deemed to refer to such law, agreement, instrument or other document as amended, supplemented, modified and restated from time to time to the extent permitted by the provisions thereof.  All references to “dollars” or “$” in this Agreement refer to United States dollars.  Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa.  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or 

A-6

resolved against any party hereto, whether under any rule of construction or otherwise.  On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.
22.    Code Section 409A. The PSUs, dividend equivalents and any amounts payable pursuant to this Agreement are intended to be exempt from or compliant with Section 409A of the Code and the Treasury regulations and other interpretive guidance issued thereunder (collectively, “Section 409A”).  If Employee is deemed to be a “specified employee” within the meaning of Section 409A, as determined by the Plan Administrator, at a time when Employee becomes eligible for settlement of the PSUs or payment of dividend equivalents upon his “separation from service” within the meaning of Section 409A, then to the extent necessary to prevent any accelerated or additional tax under Section 409A, such settlement will be delayed until the earlier of: (a) the date that is six months following Employee’s separation from service and (b) Employee’s death.  Notwithstanding the foregoing, the Company makes no representations that the payments provided under this Agreement are exempt from or compliant 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 Employee on account of non-compliance with Section 409A.
23.    Non-Competition; Non-Solicitation. 
(a)    Employee acknowledges that, in the course of employment with the Company, the Company will provide Employee with confidential information.  Employee further acknowledges that the Company’s issuance of the PSUs herein further aligns Employee’s interests with the long-term business interests of the Company, and that the restrictions set forth in this Section 23 are reasonable in all respects and necessary to protect the Company’s legitimate business interests, including the protection of the confidential information and its goodwill.  Employee further acknowledges that Employee’s commitment to abide by the terms of this Section 23 is a material inducement for the Company to enter into this Agreement and issue the PSUs hereunder.   
(b)    During the Prohibited Period, Employee shall not: (i) within the Market Area, engage in competition with the Company in any material aspect of the Business, which prohibition shall prevent Employee from directly or indirectly owning, managing, operating, joining, becoming an officer, director, employee or consultant of, or otherwise being affiliated with, any person or entity engaged in the Business in the Market Area in competition with the Company; (ii) solicit or encourage any customer or supplier of the Company to cease or lessen such customer’s or supplier’s business with the Company; or (iii) solicit or encourage any employee or contractor of the Company to terminate his, her or its employment or engagement with the Company. 
(c)    The following terms shall have the following meanings: 
(i)    “Business” shall mean the business and operations that are the same or similar to those performed by the Company during the period that Employee is employed by the Company, which business and operations include acquiring, exploiting and developing oil and gas assets in the Market Area. 

A-7

 (ii)    “Market Area” shall mean any principal area in which the Company is engaged in the Business as of Employee’s termination date. 
(iii)    “Prohibited Period” shall mean the period during which Employee is employed by the Company and continuing as follows:  
		
	(A)
	if Employee is involuntarily terminated by the Company without Cause, the Prohibited Period shall end on the date that is six months following Employee’s termination date (or such earlier date as corresponds with the number of months of severance pay received by Employee from the Company); and

		
	(B)
	if Employee voluntarily resigns or is terminated for Cause, the Prohibited Period shall end on the date that is twelve months following Employee’s termination date.

[Remainder of Page Intentionally Blank]

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