Amended and Restated
Change of Control Agreement
This Amended and Restated Change of Control
Agreement (the “Agreement”) between Stratus Properties
Inc., a Delaware corporation (the “Company”), and John
E. Baker (the “Executive”) is dated effective as of
January 26, 2007 (the “Agreement Date”), as amended and
restated effective December 30, 2008 (the “Amendment
Date”).
ARTICLE I
Definitions
1.1
Board . “Board” shall mean the
Board of Directors of the Company, or if after a Change of Control,
the Post-Transaction Corporation.
1.2
Cause . “Cause” shall
mean:
(a) The
Executive’s willful and continued failure to perform
substantially the Executive’s duties with the
Post-Transaction Corporation or its Affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is
delivered to the Executive by the Board, which specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive’s
duties;
(b) The willful
engaging by the Executive in conduct that is demonstrably and
materially injurious to the Post-Transaction Corporation or any or
its Affiliates, monetarily or otherwise; or
(c) The final
conviction of the Executive or an entering of a guilty plea or a
plea of no contest by the Executive to a felony.
For purposes of
this provision, no act or failure to act, on the part of the
Executive, will be considered “willful” unless it is
done, or omitted to be done, by the Executive in bad faith or
without a reasonable belief that the act or omission was in the
best interest of the Post-Transaction Corporation or its
Affiliates. Any act, or failure to act, based on
authority given pursuant to a resolution duly adopted by the Board
or the advice of counsel to the Post-Transaction Corporation or its
Affiliates will be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests
of the Post-Transaction Corporation or its
Affiliates. The termination of employment of the
Executive will not be deemed to be for Cause unless and until there
has been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of
the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive has engaged in the
conduct described in subparagraph (a), (b) or (c) above, and
specifying the particulars of such conduct.
1.3
Change of Control
. (a) “Change of
Control” means (capitalized terms not otherwise defined will
have the meanings ascribed to them in paragraph (b)
below):
(i) the acquisition by
any Person together with all Affiliates of such Person, of
Beneficial Ownership of the Threshold Percentage or more; provided,
however, that for purposes of this Section 1.3(a)(i), the following
will not constitute a Change of Control:
(A) any acquisition
(other than a “Business Combination,” as defined below,
that constitutes a Change of Control under Section 1.3(a)(iii)
hereof) of Common Stock directly from the Company,
(B) any acquisition of
Common Stock by the Company or its subsidiaries,
(C) any acquisition of
Common Stock by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation or other
entity controlled by the Company, or
(D) any acquisition of
Common Stock pursuant to a Business Combination that does not
constitute a Change of Control under Section 1.3(a)(iii) hereof;
or
(ii) individuals who,
as of the effective date of this Agreement, constitute the Board
(the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the effective
date of this Agreement whose election, or nomination for election
by the Company’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board will be considered a member of the Incumbent Board, unless
such individual’s initial assumption of office occurs as a
result of an actual or threatened election contest with respect to
the election or removal of directors or any other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Incumbent Board; or
(iii) the consummation
of a reorganization, merger or consolidation (including a merger or
consolidation of the Company or any direct or indirect subsidiary
of the Company), or sale or other disposition of all or
substantially all of the assets of the Company (a “Business
Combination”), in each case, unless, immediately following
such Business Combination:
(A) the individuals
and entities who were the Beneficial Owners of the Company Voting
Stock immediately prior to such Business Combination have direct or
indirect Beneficial Ownership of more than 50% of the then
outstanding shares of common stock, and more than 50% of the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, of the
Post-Transaction Corporation, and
(B) no Person together
with all Affiliates of such Person (excluding the Post-Transaction
Corporation and any employee benefit plan or related trust of
either the Company, the Post-Transaction Corporation or any
subsidiary of either corporation) Beneficially Owns 30% or more of
the then outstanding shares of common stock of the Post-
Transaction
Corporation or 30% or more of the combined voting power of the then
outstanding voting securities of the Post-Transaction Corporation,
and
(C) at least a
majority of the members of the board of directors of the
Post-Transaction Corporation were members of the Incumbent Board at
the time of the execution of the initial agreement, and of the
action of the Board, providing for such Business Combination;
or
(iv) approval by the
shareholders of the Company of a complete liquidation or
dissolution of the Company.
(b) As used in this
Section 1.3 and elsewhere in this Agreement, the following terms
have the meanings indicated:
(i)
Affiliate: “Affiliate” means a Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
another specified Person.
(ii) Beneficial
Owner: “Beneficial Owner” (and variants
thereof), with respect to a security, means a Person who, directly
or indirectly (through any contract, understanding, relationship or
otherwise), has or shares (A) the power to vote, or direct the
voting of, the security, and/or (B) the power to dispose of, or to
direct the disposition of, the security.
(iii) Company Voting
Stock: “Company Voting Stock” means any
capital stock of the Company that is then entitled to vote for the
election of directors.
(iv) Majority
Shares: “Majority Shares” means the number
of shares of Company Voting Stock that could elect a majority of
the directors of the Company if all directors were to be elected at
a single meeting.
(v)
Person: “Person” means a natural person or
entity, and will also mean the group or syndicate created when two
or more Persons act as a syndicate or other group (including
without limitation a partnership, limited partnership, joint
venture or other joint undertaking) for the purpose of acquiring,
holding, or disposing of a security, except that
“Person” will not include an underwriter temporarily
holding a security pursuant to an offering of the
security.
(vi) Post-Transaction
Corporation: Unless a Change of Control includes a
Business Combination, “Post-Transaction Corporation”
means the Company after the Change of Control. If a
Change of Control includes a Business Combination,
“Post-Transaction Corporation” will mean the
corporation or other entity resulting from the Business Combination
unless, as a result of such Business Combination, an ultimate
parent entity controls the Company or all or substantially all of
the Company’s assets either directly or indirectly, in which
case, “Post-Transaction Corporation” will mean such
ultimate parent entity.
(vii) Threshold
Percentage: “Threshold Percentage” means 30%
of all then outstanding Company Voting Stock.
1.4
Code . “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to
time.
1.5
Common Stock
: “Common
Stock” shall mean the common stock, $0.01 par value per
share, of the Company.
1.6
Company . As used in this Agreement,
“Company” shall mean the Company as defined above and
any successor to or assignee of (whether direct or indirect, by
purchase, merger, consolidation or otherwise) all or substantially
all of the assets of the Company.
1.7
Disability
. “Disability”
shall mean:
(a) A disability
entitling the Executive to receive benefits under a long-term
disability insurance policy maintained by the Post-Transaction
Corporation or an Affiliate in effect at the time either because he
is totally disabled or partially disabled, as such terms are
defined in such policy in effect as of the Agreement Date or as
similar terms are defined in any successor policy.
(b) If there is no
long-term disability plan in effect covering the Executive, and if
(i) a physical or mental illness renders the Executive incapable of
satisfactorily discharging his duties and responsibilities to the
Post-Transaction Corporation or an Affiliate for a period of 90
consecutive days, and (ii) such incapacity is certified in writing
by a duly qualified physician chosen by the Post-Transaction
Corporation or an Affiliate and reasonably acceptable to the
Executive or his legal representatives, then the Board will have
the power to determine that the Executive has become
disabled. If the Board makes such a determination, the
Post-Transaction Corporation or its Affiliate will have the
continuing right and option, during the period that such disability
continues, and by notice given in the manner provided in this
Agreement, to terminate the status of Executive as an officer and
employee. Any such termination will become effective 60
days after such notice of termination is given, unless within such
60-day period, the Executive becomes capable of rendering services
of the character contemplated hereby (and a physician chosen by the
Post-Transaction Corporation or an Affiliate and reasonably
acceptable to the Executive or his legal representatives so
certifies in writing) and the Executive in fact resumes such
services.
(c) The
“Disability Effective Date” will mean the date on which
termination of Executive’s status as an officer and employee
becomes effective due to Disability.
1.8
Good Reason
. “Good
Reason” shall mean:
(a) Any failure of the
Post-Transaction Corporation to provide the Executive with the
position, authority, duties and responsibilities at least
commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day
period immediately preceding the Change of
Control. Executive’s position, authority, duties
and responsibilities after a Change of Control shall not be
considered commensurate in all material respects with
Executive’s position, authority, duties and responsibilities
prior to a Change of Control unless after the Change of Control the
Executive holds an equivalent position in the Post-Transaction
Corporation;
(b) The assignment to
the Executive of any duties inconsistent in any material respect
with Executive’s position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities
as contemplated by Section 2.1(b) of this Agreement, or any other
action that results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith that is
remedied within 10 days after receipt of written notice thereof
from the Executive to the Post-Transaction Corporation;
(c) Any failure by the
Post-Transaction Corporation or its Affiliates to comply with any
of the provisions of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
that is remedied within 10 days after receipt of written notice
thereof from the Executive to the Post-Transaction Corporation;
or
(d) The
Post-Transaction Corporation or its Affiliates requiring the
Executive to be based at any office or location other than as
provided in Section 2.1(b)(ii) hereof or requiring the Executive to
travel on business to a substantially greater extent than required
immediately prior to the Change of Control.
For purposes of
this Section 1.4, any determination of “Good Reason”
made by the Executive in good faith and based upon his reasonable
belief and understanding shall be conclusive.
1.9
Termination Date
. “Termination
Date” shall mean, if Executive’s status as an officer
and employee is terminated (i) by reason of Executive’s
death, the date of Executive’s death, (ii) by reason of
Disability, the Disability Effective Date, (iii) by the Company
other than by reason of death or Disability, the date of delivery
of the notice of termination or any later date specified in the
notice of termination, which date will not be more than 30 days
after the giving of the notice, or (iv) by the Executive other than
by reason of death, the date of delivery of the notice of
termination or any later date specified in the notice of
termination, which date will not be more than 30 days after the
giving of the notice.
ARTICLE II
Change of Control
Benefit
2.1
Employment Term and Capacity
after Change of Control . (a) This Agreement shall
commence on the Agreement Date and continue in effect through
January 26, 2010. If the Executive continues to serve as
an officer of the Company and a Change of Control occurs on or
before January 26, 2010, then the Executive’s employment term
(the “Employment Term”) shall continue through the
later of the third anniversary of the Change of Control, subject to
any earlier termination of Executive’s status as an officer
and employee pursuant to this Agreement.
(b) After a Change of
Control and during the Employment Term, (i) the Executive’s
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Change of
Control and (ii) the Executive’s services shall be performed
at the location where the Executive was employed immediately
preceding the Change
of
Control or any office or location less than 35 miles from such
location. Executive’s position, authority, duties
and responsibilities after a Change of Control shall not be
considered commensurate in all material respects with
Executive’s position, authority, duties and responsibilities
prior to a Change of Control unless after the Change of Control the
Executive holds an equivalent position in the Post-Transaction
Corporation.
2.2
Compensation and
Benefits . During the Employment Term, the
Executive shall be entitled to the following compensation and
benefits:
(a) Salary
. An annual salary (“Base Salary”) at the
highest rate in effect for the Executive at any time during the
120-day period immediately preceding the Change of Control, payable
to the Executive at such intervals no less frequent than the most
frequent intervals in effect at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable
to the Executive, the intervals in effect at any time after the
Change of Control for other most senior executives of the
Post-Transaction Corporation and its Affiliates.
(b) Bonus
. Executive shall be entitled to participate in an
annual incentive bonus program applicable to other most senior
executives of the Post-Transaction Corporation and its Affiliates
but in no event shall such program provide the Executive with
incentive opportunities less favorable than the most favorable of
those provided by the Company and its Affiliates for the Executive
under the Company’s annual cash plan as in effect for
Executive at any time during the 120-day period immediately
preceding the Change of Control or, if more favorable to the
Executive, those provided generally at any time after the Change of
Control to other most senior executives of the Post-Transaction
Corporation and its Affiliates. Any such bonus shall be
paid in cash no later than 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 Post-Transaction
Corporation and its Affiliates.
(d) Expenses
. The Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses (including food
and lodging) incurred by the Executive in accordance with the most
favorable agreements, policies, practices and procedures of the
Company and its Affiliates in effect for the Executive at any time
during the 120-day period immediately preceding the Change of
Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most senior
executives of the Post-Transaction Corporation and its
Affiliates.
(e) Incentive,
Savings and Retirement Plans . The Executive shall
be entitled to participate in all incentive, savings and retirement
plans, practices, policies and programs applicable generally to
other most senior executives of the Post-Transaction Corporation
and its
Affiliates, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable than the most favorable of those provided by the
Company and its Affiliates for the Executive under any agreements,
plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Change of
Control.
(f) Welfare Benefit
Plans . The Executive and the Executive’s
family shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Post-Transaction Corporation and its
Affiliates (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other most senior executives of the
Post-Transaction Corporation and its Affiliates, but in no event
shall such plans, practices, policies and programs provide the
Executive with benefits, in each case, less favorable than the most
favorable of any agreements, plans, practices, policies and
programs of the Company and its Affiliates in effect for the
Executive at any time during the 120-day period immediately
preceding the Change of Control.
(g) Indemnification
and Insurance . The Post-Transaction Corporation
shall indemnify the Executive, to the fullest extent permitted by
applicable law, for any and all claims brought against him arising
out his services during or prior to the Employment
Term. In addition, the Post-Transaction Corporation
shall maintain a directors’ and officers’ insurance
policy covering the Executive substantially in the form of the
policy maintained by the Company and its Affiliates at any
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