Exhibit 10(ii)

 

 

 

 

MASTER SALES AGREEMENT

BY AND BETWEEN

LUBY'S, INC.

AND

PAPPAS RESTAURANTS, INC.

AND

PAPPAS PARTNERS, L.P.

JULY 23, 2002

MASTER SALES AGREEMENT

        THIS MASTER SALES AGREEMENT is made and entered into this 23rd day of
July, 2002, by and between Luby's Inc., a Delaware corporation ("Luby's"), on
the one hand, and Pappas Restaurants, Inc. (a Texas corporation) and Pappas
Partners, L.P. (a Texas limited partnership), on the other hand (such Pappas
entities being collectively referred to herein as the "Pappas Entities").

W I T N E S S E T H:

        WHEREAS, Luby's is in the business of owning and operating food
cafeterias and other food purveying businesses;

        WHEREAS, the Pappas Entities are in the business, among other things, of
designing and fabricating restaurant equipment and furnishings and have
developed skills and expertise in such regards over many years of operation;

        WHEREAS, the Pappas Entities desire from time to time to sell certain of
their products on a non-exclusive basis to Luby's and Luby's desires from time
to time to purchase certain products from the Pappas Entities;

        WHEREAS, Luby's and the Pappas Entities desire to set up a mechanism and
master agreement among them for purposes of facilitating the placement and
fulfillment of orders for products;

        NOW, THEREFORE, in consideration of the premises, the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties hereby
agree as follows:

ARTICLE I
DEFINITIONS

        1.1.  Definitions

.  For the purposes of this Agreement, in addition to the terms defined
elsewhere herein, the following terms shall have the following meanings:

              (a)   "Affiliate" means any Person that controls, is controlled by
or is under common control with any other Person;

              (b)   "Agreement" means this Master Sales Agreement, as the same
may subsequently be amended, modified or supplemented in accordance with its
terms;

              (c)   "Encumbrance" means any mortgage, pledge, lien, claim,
encumbrance, charge or other security interest, option, defect or other right of
any third Person of any nature whatsoever, other than inchoate mechanic's,
materialmen's and similar liens arising in the ordinary course of business;

              (d)   "Party" means either Luby's, on the one hand, or the Pappas
Entities, on the other, and "Parties" means both Luby's and the Pappas Entities;

              (e)   "Person" means a natural person or any entity of any kind,
including (without limitation) joint stock companies, corporations,
partnerships, limited liability companies, governmental entities and any other
entity organized or formed under the law of any jurisdiction;

              (f)   "Product" means any product manufactured or sold by the
Pappas Entities as may be agreed upon by the Parties in writing from time to
time;

              (g)   "Purchaser" means Luby's, and includes all subsidiaries and
Affiliates thereof; and

              (h)   "Seller" means the Pappas Entities and includes all
subsidiaries and Affiliates thereof.

        1.2  Other Definitional Provisions

.  

              (a)   The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall, unless a specific provision is
expressly referenced, refer to this Agreement as a whole and not to any
particular provision of this document, and Article references contained in this
Agreement are references to the Articles in this Agreement, unless otherwise
specified.

              (b)   All words used herein in the singular shall extend to and
include the plural, and all words used herein in the plural shall extend to and
include the singular.

              (c)   All words used in any gender shall extend to and include all
genders.

ARTICLE II
SALE AND PURCHASE

        2.1  Sale and Purchase Obligations

.

              (a)   Seller agrees to sell to Purchaser, only upon Purchaser's
order (after compliance with the terms of Section 2.3 hereof), and Purchaser
thereafter agrees to purchase from Seller, any Product of Seller offered to
Purchaser at any time during the term of this Agreement and in accordance with
the terms and provisions hereof.

              (b)   If Seller is unable, for any reason other than a volitional
declination to do so, to supply Purchaser with Purchaser's requirements for any
Product within the time period specified for delivery of such Product in an
order from Purchaser, then the obligations to purchase and sell hereunder shall
cease in respect of such order and shall be of no further effect or force.

              (c)  No provision of this Agreement shall be construed to impair
Seller's right to supply any Product to any person other than Purchaser.  No
provision of this Agreements shall be construed to impair Purchaser's right to
purchase any Product from any person other than Seller.

        2.2  Orders and Deliveries

.  All orders, processing and deliveries of any Product shall be made in
accordance with customary and routine handling of orders, processing and
deliveries for fabricated restaurant equipment and furnishings to third parties
in respect of the particular Product or type of Product, unless otherwise agreed
in writing by both Parties.

        2.3  Pricing and Payment

.

             (a)   The Product(s), and the purchase price payable by Purchaser
for each unit of the Product, shall be agreed upon between the Parties as set
forth in the proposed order with respect to the Products identified
therein.  The proposed order shall be presented to a board committee of
Purchaser for review and approval which does not include any person affiliated
with the Pappas Entities or shall otherwise be handled in accordance with a
procedure devised by such a committee.  Only after review and approval by such
committee, or in accordance with the procedure devised by such committee, may
any order be placed by Purchaser or honored by Seller.

              (b)  As reasonably requested from time to time, Seller shall
provide Purchaser reasonable information to allow Purchaser to confirm Seller's
approximate costs of manufacturing or purchasing, as the case may be, any
Product offered to Purchaser by Seller.

              (c)  Purchaser shall be responsible for the payment of all taxes
related to the sale and purchase of the Products.

              (d)  Seller shall send Purchaser an invoice within 30 days after
the delivery of Products pursuant to any order setting forth the types and
quantities of Products shipped by Seller to Purchaser during the previous
month.  Within 30 days after the receipt of such invoice, Purchaser shall remit
payment for such Products to Seller.

        2.4  Inspection and Rejection

.

              (a)  Purchaser reserves the right to reject or revoke acceptance
of any shipment of Product as a result of any defect or nonconformity
thereof.  If any Product is rejected or its acceptance is revoked, Purchaser
shall notify Seller of such rejection or revocation of acceptance within 30 days
of receipt of such Product, specifying with particularity the grounds for its
rejection or revocation of acceptance.

              (b)  Seller shall immediately replace any such Product or
immediately refund the price therefor, at Purchaser's option.  If Seller is
unable to replace any such Product within 90 days of Purchaser's rejection or
revocation of acceptance for any reason other than volitional declination to do
so, then the obligations to sell and purchase in respect of such Product shall
cease and be of no further effect or force.

              (c)  All rejected Products shall be returned by Purchaser to
Seller, at Seller's sole cost, promptly after Purchaser's rejection or
revocation of acceptance of such Products.

Warranties of Seller.

        2.5  Warranties of Seller

.

              (a)  SELLER EXTENDS TO PURCHASER THE ORDINARY AND CUSTOMARY
WARRANTY OF FITNESS FOR PURPOSE, AS DESCRIBED IN AN ORDER, IN RESPECT OF EACH
PRODUCT SOLD BY SELLER TO PURCHASER AS IF PURCHASER WERE A THIRD PARTY, BUT
THERE ARE NO OTHER EXPRESS OR IMPLIED WARRANTIES.

              (b)  Seller warrants to Purchaser that the Products, at the time
of delivery to Purchaser, will be free from any Encumbrances.

        2.6  Risk of Loss

.  The risk of loss from any casualty to the Products, regardless of the cause,
shall be on Seller until the time of receipt of the Products by Purchaser at
Purchaser's delivery destination and until Purchaser has completed any proper
receipt inspection.

        2.7  Indemnification

.  Seller agrees to defend, indemnify and hold harmless Purchaser, and it
affiliates and their respective directors, officer, employees, agents, successor
and assigns from and against any and all claims, losses, damages, liabilities,
reasonable counsel fees and costs incident thereto incurred by or asserted
against Purchaser as a result of damage to the property of Purchaser or others,
or personal injuries to or injuries resulting in the death of any person or
persons, including directors, officers, employees and agents of Purchaser
relating to the Products; provided, however, Seller shall not have any liability
(whether direct or indirect, in contract, tort or otherwise) to Purchaser
unless, if contested, such claims, losses, damages, liabilities, counsel fees or
costs are determined, in a final judgment by a court of competent jurisdiction
(not subject to further appeal), to have resulted primarily and directly from
the gross negligence or willful misconduct of Seller or its officers, employees
or agents.

ARTICLE III
TERM AND TERMINATION

        3.1  Term

.  The term of this Agreement shall commence on the date hereof and continue
through December 31, 2005, unless terminated in whole or in part by either party
upon not less than 10 days written notice.

        3.2  Effect of Termination

.  Termination by either Party shall not relieve (a) Seller from its obligation
to complete and deliver any unfinished order; (b) Seller from the warranty, risk
of loss or indemnification provisions of Sections 2.5, 2.6., and 2.7; (c)
Purchaser from its obligation to pay for unfinished orders or for Products
received and accepted but not yet paid for; and (d) either Party from the
provisions of Articles 4, 5, 6 and 7.

        3.3  Termination Not Exclusive Remedy

.  The termination of this Agreement shall not release either Party from its
liability to the other Party under this Agreement arising from a breach of this
Agreement or under Section 2.7 hereof.

        3.4  Survival

.  Each of the Parties' obligations under this Agreement shall survive the
expiration or termination of this Agreement to the extent such obligations
should have been performed during the term of this Agreement and were not so
performed.  Notwithstanding the expiration or termination of this Agreement,
this Agreement shall remain in full force and effect until each Party has
discharged all of its obligations hereunder.

ARTICLE IV

CONFIDENTIAL INFORMATION

        4.1  Non-disclosure

.  Either Party may from time to time provide to the other Party certain advice,
technical information, know-how and other proprietary data and information with
respect to Products or the use or configuration thereof.  Inasmuch as various of
these materials and advice (all of which will herein be referred to as the
"Confidential Information") contain confidential information and trade secrets,
it is hereby agreed that any Confidential Information that one Party discloses
to the other is valuable, proprietary property belonging to the disclosing
Party, and the receiving Party agrees that it will neither use nor disclose to
any third party (except in the performance of its duties hereunder) any
Confidential Information, except on prior written consent of the other Party.

        4.2  Return of Information

.  The Parties agree, either upon the termination of this Agreement or upon
request, to surrender to the other all documentary material including
Confidential Information, price lists, catalogues, drawings, designs, technical
literature, sales literature, samples and any other documents, papers or other
properties of the other Party, however previously supplied.

        4.3  Survival of Article

.  The obligations of the Parties pursuant to this Article shall continue in
full force and effect after the termination of this Agreement regardless of how
this Agreement is terminated.

ARTICLE V

GOVERNING LAW

        The Parties agree that this Agreement shall be construed in accordance
with, and all disputes hereunder shall be governed by, interpreted and enforced
in accordance with the laws of the State of Texas without regard to the laws of
such state relating to conflict of laws.

ARTICLE VI

ARBITRATION

        The Parties agree that any and all disputes arising in connection with
this Agreement including, but not limited to, the validity of this provision or
the performance by either Party of any obligations, commitments or promises
hereunder, which cannot be resolved through good faith negotiations to the
mutual satisfaction of both Parties within thirty (30) calendar days (or such
longer period as may be mutually agreed upon by the Parties) after the
complaining Party has notified the other Party of the complaint, shall be
submitted to final and binding arbitration.  Any such dispute, claim or
disagreement subject to arbitration pursuant to the terms of this paragraph
shall be resolved by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA Rules").  An arbitrator
shall not have any authority to award consequential, exemplary or punitive
damages.  The Parties agree that the decision of the arbitrator selected
hereunder will be final and binding on both Parties.  The place of arbitration
shall be Houston, Texas, and each Party shall pay its individual costs and fees
arising therefrom.  Judgment upon the award resulting from arbitration may be
entered in any court having jurisdiction for direct enforcement, or any
application may be made to a court for a judicial acceptance of the award and an
order of enforcement, as the case may be.

ARTICLE VII

GENERAL PROVISIONS

        7.1  Notices

.  To be effective, all notices, consents or communications required (other than
routine orders and invoices for Products, which shall be delivered in the
customary manner as in the case of orders and invoices to third parties) shall
be in writing and shall be delivered by hand or sent by first-class prepaid
certified or registered mail, return receipt requested, overnight delivery
service or facsimile (confirmed by first-class prepaid letter sent within 24
hours of dispatch) to the Parties at their respective addresses or facsimile
numbers and to the attention of the persons set forth below.  Any Party may
change its address or facsimile number for purposes hereof by notice to all
other Parties in the manner provided above.  Notice will be effective upon
receipt.

Luby's

:

Luby's, Inc.
2211 Northeast Loop 410
San Antonio, Texas 78217-4673
Attention:  Chairman of the Finance and Audit Committee

and to

Cauthorn Hale Hornberger Fuller
Sheehan Becker & Beiter Incorporated
700 N. St. Mary's Street, Suite 600
San Antonio, Texas 78205
Attention:   Drew R. Fuller, Jr.
Telephone:  (210) 271-1700
Facsimile:   (210) 271-1730

Pappas Entities

:

Harris J. Pappas
642 Yale
Houston, Texas 77007

with a copy to:

Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention:  Charles H. Still

and shall become effective upon receipt.

        7.2  Severability

.  Should any provision of this Agreement be held unenforceable or invalid, then
the Parties hereto agree that such provision shall be deemed modified to the
extent necessary to render it lawful and enforceable, or if such a modification
is not possible without materially altering the intention of the Parties hereto,
then such provision shall be severed from this Agreement.  In such case the
validity of the remaining provisions shall not be affected and this Agreement
shall be construed as if such provision were not contained herein.

        7.3  Headings

.  All headings used herein are for the convenience of reference only, do not
constitute substantive provisions of this Agreement, and shall not be used in
construing the meaning or intent of the terms or provisions hereof.

        7.4  Assignment

.  This Agreement and the rights granted hereunder shall not be assigned in
whole or in part, either voluntarily, by operation of law or otherwise, without
the prior written consent of both Parties, except that his Agreement may be
assigned to Affiliates of a Party without prior written consent from the other
Party.  Any attempt to make an assignment without the consent required hereunder
shall be null and void and may be treated by the other Party as a breach of a
material provision of this Agreement.

        7.5  Beneficiaries

.  This Agreement shall be binding on and inure to the benefit of the Parties
and their respective successors and permitted assigns.  This Agreement is
intended solely for the benefit of Purchaser and Seller and their respective
successors and permitted assigns.

        7.6  Entire Agreement

.  This Agreement constitutes the entire agreement between Purchaser and Seller
concerning the subject of this Agreement.  This Agreement supersedes all prior
and contemporaneous agreements, communications, statements, representations and
understandings, whether oral or written, on this subject.

        7.7  Amendments

.  Purchaser and Seller, by mutual agreement in writing, may amend, modify or
supplement this Agreement.  No modification or amendment of this Agreement is
effective unless made in writing and signed by the Party to be bound, with such
written modification or amendment stating the expressed intent to modify this
Agreement.  A course of dealing or performance is not a modification unless
expressed in an appropriate written document and signed by the Party to be
bound.

        7.8  No Waiver of Rights

.  A Party's failure in one or more instances to exercise or enforce any right
provided by this Agreement or by law does not waive its right to exercise the
right in any later instance.  No waiver of any breach of this Agreement shall be
held to constitute a waiver of any other or subsequent breach.  To be effective,
a waiver must be expressly written and signed by the Party to be bound.  A
course of dealing or performance is not a waiver unless ratified in writing by
the Party to be bound.

        7.9  Counterparts

.  This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement, and shall become a binding
agreement when one or more counterparts have been signed by each Party and
delivered to the other Party.  Delivery of this Agreement by a Party may be
effected by sending the other Party a facsimile copy of this Agreement as
executed by the delivering Party.

        IN WITNESS WHEREOF, Luby's and the Pappas Entities have executed this
Agreement as of the date first written above.

 

LUBY'S, INC.

By:

/s/Robert T. Herres

Name:

Robert T. Herres

Title:

Chairman of the Board

 

 

THE PAPPAS ENTITIES

By:

/s/Pete H. Pappas

Name:

Pete H. Pappas

Title:

Authorized Signatory

 

Procedure Approved Pursuant to Section 2.3 of the Master Sales Agreement by and
among Luby's, Inc., Pappas Restaurants, Inc., and Pappas Partners, Ltd.

        From time to time the Company shall prepare an estimate regarding the
Products it desires that the Pappas Entities provide to the Company under the
Master Sales Agreement (the "Agreement"), and the estimated purchase price to be
paid by the Company to the Pappas Entities for those Products.  In determining
whether to  procure the Products from the Pappas Entities, the Company shall
value the Products based on a review of (i) the cost of such Products if they
were provided by one or more independent third parties, (ii) the Pappas
Entities' direct and indirect costs allocable thereto, calculated in accordance
with the Pappas Entities' usual accounting practices, (iii) the advice and
counsel of valuation experts who have no affiliation with the Pappas Entities,
and (iv) any other information, advice, or counsel which the Company considers
useful in determining the reasonableness of fees proposed for any Products.  The
Director of Internal Audit of the Company shall present such information to the
Committee for review and approval prior to any such Products being ordered or
contemplated expenditures being incurred; provided, however, the prior review
and approval of such Products and contemplated expenditures is not required if
the contemplated expenditures, when aggregated with all other expenditures which
have not been specifically reviewed and approved by the Committee during the
then current fiscal quarter, would not exceed fifteen thousand dollars
($15,000).  Except as contemplated by the proviso in the immediately preceding
sentence, Products may only be provided after review and approval by the
Committee.