Exhibit 10z


    
      

    


    EMPLOYMENT
      AGREEMENT

    


    This
      Employment Agreement (“Agreement”), between Luby’s, Inc., a Delaware corporation
      (“Luby’s” or the “Company”), and Harris J. Pappas, a resident of Houston,
      Texas, (“Executive”) is executed this 9th day of November, 2005 to be effective
      as of the 1st day of September, 2005 (“Effective Date”). For purposes of this
      Agreement, “Luby’s” or the “Company” shall include the subsidiaries of Luby’s.
      Luby’s and Executive are sometimes referred to herein individually as a “Party,”
and collectively as the “Parties.” The Parties hereby agree as follows:


    


    1.   Definitions.
      As used
      in this Agreement, and unless the context requires a different meaning, the
      following terms have the meanings indicated:

    


    “Affiliate”
      means,
      with respect to any Person, any other Person directly, or indirectly through
      one
      or more intermediaries, controlling, controlled by or under common control
      with
      such Person. For purposes of this definition and this Agreement, the term
“control” (and correlative terms “controlling,” “controlled by” and “under
      common control with”) means possession of the power, whether by contract, equity
      ownership or otherwise, to direct the policies or management of a
      Person.

    


    “Associate”
      has the
      meaning ascribed to such term in Rule 12b-2 under the Exchange Act.

    


    “Beneficially
      Own” or “Beneficial Ownership”
      is
      defined in Rules 13d-3 and 13d-5 of the Exchange Act, but without taking into
      account any contractual restrictions or limitations on voting or other
      rights.

    


    “Board”
      or “Board of Directors”
      means
      the Board of Directors of the Company.

    


    “Business
      Combination” means
      (i) any consolidation, merger, share exchange or similar business
      combination transaction involving the Company with any Person or (ii) the
      sale, assignment, conveyance, transfer, lease or other disposition by the
      Company of all or substantially all of its assets.

    


    “Change
      of Control” shall
      mean the occurrence of any of the events described in subsections (i) through
      (iv) below:


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (i)   The
      Rights Agreement shall have been determined to be invalid or is otherwise
      abrogated by a court of competent jurisdiction in a final and non-appealable
      judgment rendered in connection with a contest for control of the Company and
      a
      substitute defense mechanism having the effectiveness of the Rights Agreement
      is
      not promptly adopted or, if adopted, is determined to be invalid or is otherwise
      abrogated, and either (y) the Company has received a report on Schedule 13D,
      or
      an amendment to such a report, filed with the SEC pursuant to Section 13(d)
      of
      the Exchange Act disclosing that any Person or 13d Group other than Harris
      J.
      Pappas or Harris J. Pappas, individually or together with their Affiliates
      and Associates and any 13d Group of which they are a part, Beneficially Owns,
      directly or indirectly, twenty percent or more of the combined voting power
      of
      the outstanding Common Stock, or (z) the Board of Directors has actual knowledge
      of facts on the basis of which any Person or 13d Group other than Harris J.
      Pappas or Harris J. Pappas, individually or together with their Affiliates
      and
      Associates and any 13d Group of which they are a part, is required to file
      such
      a report on Schedule 13D, or to make an amendment to such a report, with the
      SEC
      (or would be required to file such a report or amendment upon the lapse of
      the
      applicable period of time specified in Section 13(d) of the Securities Act)
      disclosing that such Person or 13d Group other than Harris J. Pappas or
      Harris J. Pappas, individually or together with their Affiliates and
      Associates and any 13d Group of which they are a part, Beneficially Owns,
      directly or indirectly, twenty percent or more of the combined voting power
      of
      the outstanding Common Stock.

    


    (ii)   Either
      (y) the purchase by any Person, other than the Company or a wholly-owned
      subsidiary of the Company or Harris J. Pappas or Harris J. Pappas, individually
      or together with their Affiliates and Associates and any 13d Group of which
      they
      are a part, of shares of Common Stock pursuant to a tender or exchange offer
      to
      acquire any Common Stock (or securities convertible into Common Stock) for
      cash,
      securities or any other consideration or (z) any Person, other than the Company
      or a wholly-owned subsidiary of the Company or Harris J. Pappas or Harris J.
      Pappas or any of their Affiliates, Associates or members of any 13d Group of
      which they are a part, individually or together, shall make any such offer
      to
      acquire any Common Stock pursuant to a tender or exchange offer for cash,
      securities or any other consideration and either (1) the Company shall have
      recommended that stockholders accept such offer or (2) within 10 business days
      (as such term is used in Rule 14e-2 under the Exchange Act), the Company shall
      have made no recommendation that stockholders reject such offer or (3) the
      Company shall have recommended that stockholders reject such offer and the
      Rights Agreement shall have been determined to be invalid or is otherwise
      abrogated by a court of competent jurisdiction in a final and non-appealable
      judgment rendered in connection with a contest for control of the Company and
      a
      substitute defense mechanism having the effectiveness of the Rights Agreement
      is
      not promptly adopted or, if adopted, is determined to be invalid or is otherwise
      abrogated, provided that, after consummation of any such offer, such Person
      Beneficially Owns, or would Beneficially Own, directly or indirectly, twenty
      percent or more of the combined voting power of the outstanding Common Stock
      (calculated as provided in paragraph (d) of Rule 13d-3 under the Exchange Act
      in
      the case of rights to acquire stock).


    
      
        
        

      

      
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    (iii)   The
      Company shall, after approval by its Board of Directors or an authorized
      committee thereof, enter into any agreement contemplating a transaction
      described below, other than any such transaction with Harris J. Pappas or
      Harris J. Pappas, individually or together with their Affiliates and
      Associates and any 13d Group of which they are a part:  (v) a
      transaction pursuant to which the Company agrees to issue or sell, regardless
      of
      the consideration therefor, a number of its shares of Common Stock that would
      result in any Person acquiring Beneficial Ownership, directly or indirectly,
      of
      twenty percent or more of the combined voting power of the outstanding Common
      Stock, calculated as in clause (ii) above; (w) any consolidation, merger or
      similar transaction involving the Company in which the Company is not the
      continuing or surviving corporation or pursuant to which shares of Common Stock
      would be converted into cash, securities or other property, other than a
      consolidation, merger or similar transaction involving the Company in which
      holders of its Common Stock immediately prior to the consolidation or merger
      or
      similar transaction own at least a majority of the combined voting power of
      the
      outstanding capital stock of the surviving corporation immediately after the
      consolidation, merger or similar transaction (or at least a majority of the
      combined voting power of the outstanding capital stock of a corporation which
      owns directly or indirectly all of the voting stock of the surviving
      corporation); (x) any consolidation, merger or similar transaction involving
      the
      Company in which the Company is the continuing or surviving corporation but
      in
      which the stockholders of the Company immediately prior to the consolidation,
      merger or similar transaction do not hold at least a majority of the combined
      voting power of the outstanding Common Stock of the continuing or surviving
      corporation (except where such holders of Common Stock hold at least a majority
      of the combined voting power of the outstanding capital stock of the corporation
      which owns directly or indirectly all of the voting stock of the Company);
      (y)
      any sale, lease, exchange or other transfer (in one transaction or a series
      of
      related transactions) of all or substantially all the assets of the Company
      (except such a transfer to a corporation which is wholly owned, directly or
      indirectly, by the Company), or any complete liquidation of the Company; or
      (z)
      any consolidation, merger or similar transaction involving the Company where,
      after the consolidation, merger or similar transaction, one Person owns 100%
      of
      the shares of Common Stock (except where the holders of the Company’s voting
      stock immediately prior to such consolidation, merger or similar transaction
      own
      at least a majority of the combined voting power of the outstanding capital
      stock of such Person immediately after such consolidation, merger or similar
      transaction).

    


    (iv)   A
      change
      in the majority of the members of the board of directors of the Company within
      a
      24-month period unless the election or nomination for election by the
      shareholders of each new director was approved by the vote of at least
      two-thirds of the directors then still in office who were in office at the
      beginning of the 24-month period.

    


    For
      purposes of this Agreement, the “effective date of a Change of Control” is the
      date that an event described in subsection (i), (ii), (iii) or (iv) occurs
      or
      the date upon which all the events necessary to constitute the Change of Control
      shall have occurred.

    


    “Common
      Stock”
      means
      the Company’s common stock, par value $.32 per share, and any capital stock for
      or into which such Common Stock hereafter is exchanged, converted, reclassified
      or recapitalized by the Company or pursuant to an agreement or Business
      Combination to which the Company is a party.


    
      
        
        

      

      
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    “Covenant
      Period”
      means:

    


    (i)   twenty-four
      (24) months if Employee is terminated by the Company for Cause or if Executive
      terminates his employment without Good Reason; or (ii) if Executive’s
      employment is terminated for any other reason;

    


    
      	 	
              (x)

            	
              twelve
                (12) months for the activities prohibited by clauses (ii) and (iv) of
                Section 11(b); and 

            


    

    


    
      	 	
              (y)

            	
              twenty-four
                (24) months for the activities prohibited by any other provision
                of
                Section 11.

            


    

    


    “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended from time to time, and the
      rules
      and regulations of the SEC promulgated thereunder.

    


    “Person”
      means an
      individual or a corporation, partnership, trust, incorporated or unincorporated
      association, limited liability company, joint venture, joint stock company,
      government (or an agency or political subdivision thereof) or other entity
      of
      any kind.

    


    “Rights
      Agreement”
      means
      the Rights Agreement dated April 16, 1991 between the Company and Ameritrust
      Company, N.A. as Agent, as amended from time to time.

    


    “SEC” means
      the
      Securities and Exchange Commission.

    


    “13d
      Group”
      means a
      group within the meaning of Section 13(d)(3) of the Exchange Act.

    


    2.   Employment.
      Luby’s
      hereby employs Executive, and Executive hereby accepts employment with Luby’s,
      subject to the terms and conditions set forth in this Agreement. 

    


    3.   Term.
      Subject
      to the provisions for termination of employment as provided in Section 8(a),
      Executive’s employment under this Agreement shall be for a period beginning on
      the Effective Date and ending on August 31, 2008 (“Term”).

    


    4.   Compensation.
      Executive’s compensation during his employment under the terms of this Agreement
      shall be as follows: 

    


    (a)   Base
      Salary.
      Luby’s
      shall pay to Executive a fixed annual base salary (the “Base Salary”) of Four
      Hundred Thousand Dollars ($400,000) for each year of the Term. The Base Salary
      shall be payable in equal, semi-monthly installments on the 15th day and last
      day of each month or at such other times and in such installments as may be
      agreed between Luby’s and Executive. All payments shall be subject to the
      deduction of payroll taxes, income tax withholdings, and similar deductions
      and
      withholdings as required by law. 


    
      
        
        

      

      
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    (b)   Bonus.
      During
      each year of the Term, in addition to the Base Salary, Executive shall be
      eligible, but not entitled, to receive bonus compensation as the Board of
      Directors of Luby’s or an authorized committee thereof shall from time to time
      determine in its sole discretion.

    


    5.   Expenses
      and Benefits.

    


    (a)   During
      his employment hereunder, Executive is authorized to incur reasonable and
      appropriate expenses related to the business of Luby’s, including expenses for
      entertainment, travel, and similar matters. Luby’s will reimburse Executive for
      such expenses upon presentation by Executive of such accounts and records as
      Luby’s may from time to time reasonably require.

    


    (b)   Luby’s
      also agrees to provide Executive with the following benefits during his
      employment hereunder:

    


    (i)
  Employee
      Benefit Plans.
      Executive and, to the extent applicable, Executive’s spouse, dependents, and
      beneficiaries, shall be allowed to participate on the same terms in all
      benefits, plans, and programs, including improvements or modifications of the
      same, which are now, or may hereafter be, available to other executive employees
      of Luby’s; provided that Executive shall not be permitted without the express
      consent of the Board of Directors of Luby’s to participate in any bonus,
      incentive, profit-sharing, or similar cash payment plan. Such benefits, plans,
      and programs may include, without limitation, stock option or thrift plans,
      health insurance or health care plans, life insurance, disability insurance,
      supplemental retirement plans, vacation, and sick leave. Luby’s shall not,
      however, by reason of this paragraph be obligated to institute, maintain, or
      refrain from changing, amending, or discontinuing any such benefit plan or
      program, so long as such changes are similarly applicable to executive employees
      generally.

    


    (ii)
        Vacations.
      Executive shall be entitled (in addition to the usual Luby’s holidays) to paid
      vacation time for periods in each calendar year not exceeding four (4)
      weeks.

    


    (iii)  Working
      Facilities.
      Executive shall be furnished by Luby’s with an office at the Company’s principal
      office in Houston, Texas, secretarial help and other facilities and services,
      including but not limited to, full use of Luby’s mail and communication
      facilities and services reasonably suitable to his position and reasonably
      necessary for the performance of his duties under this Agreement. 

    


    6.   Positions
      and Duties.
      Executive is employed hereunder as Chief Executive Officer of Luby’s or in such
      other positions as the Parties may mutually agree. In addition, if requested
      to
      do so, Executive shall serve as the chief executive officer or other officer
      or
      as a member of the Board of Directors, or both, of any subsidiary or affiliate
      of Luby’s. Executive agrees to serve in the position referred to above and to
      perform diligently and to the best of his abilities the duties and services
      appertaining to such office, as well as such additional duties and services
      appropriate to such offices which the Parties mutually may agree upon from
      time
      to time. Executive’s employment shall also be subject to the policies maintained
      and established by Luby’s that are of general applicability to Luby’s executive
      employees, as such policies may be amended from time to time. Executive’s duties
      shall be performed principally at Luby’s principal place of business in Houston,
      Texas and at the locations of its operations. Executive acknowledges and agrees
      that Executive owes a fiduciary duty of loyalty to act at all times in the
      best
      interests of Luby’s. In keeping with such duty, Executive represents that he
      owes no duty to any other entity or person regarding, and shall make full
      disclosure to Luby’s of, all business opportunities pertaining to Company’s
      business which have not been previously renounced by the Board of Directors,
      as
      contemplated by Section 11 hereof, and shall not appropriate for Executive’s own
      benefit any such business opportunities.


    
      
        
        

      

      
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    7.   Extent
      of Service.
      Executive shall, during the term of this Agreement, devote his primary working
      time, attention, energies and business efforts to his duties as an employee
      of
      Luby’s and to the business and affairs of Luby’s generally, and shall not,
      during the term of this Agreement, engage, directly or indirectly, in any other
      business activity whatsoever, whether or not such business activity is pursued
      for gain, profit or other pecuniary advantage, except with the consent of the
      Board of Directors of Luby’s; however, this Section 7 shall not be construed to
      prevent Executive from, nor require board consent with respect to,
      (i) continuing executive’s senior level management of non-cafeteria style
      restaurant businesses operated by executive’s privately-held family company
      (“Executive’s Family Company”), (ii)  serving as a member of the board of
      directors or board of trustees of Executive’s Family Company or other companies
      or not-for-profit entities, or (iii) from investing his personal, private
      assets as a passive investor in such form or manner as will not require any
      active services on the part of Executive in the management or operation of
      the
      affairs of the companies, partnerships, or other business entities in which
      any
      such passive investments are made; provided in case of clause (i), (ii),
      or (iii) such activities do not conflict with the business and affairs of
      Luby’s or interfere with Executive’s ability to perform the services and
      discharge the duties required of him hereunder.

    


    8.   Termination.

    


    (a)   Termination
      of Employment.
      Notwithstanding the provisions of Section 2, the employment of the
      Executive pursuant to this Agreement shall terminate prior to the expiration
      of
      the Term, upon the occurrence of any of the following events:

    


    (i) 
         the
      death
      of the Executive;

    


    (ii)
         the
      termination of the Executive’s employment by Luby’s due to the Executive’s
      Disability (as defined in Section 8(b));

    


    (iii)   the
      termination of the Executive’s employment by the Executive for “Good Reason” (as
      defined in Section 8(d));

    


    (iv)   the
      termination of the Executive’s employment by Luby’s for “Cause” (as defined in
      Section 8(c)); or

    


    (v)
   for
      any
      reason whatsoever in the discretion of the Executive or Luby’s.


    
      
        
        

      

      
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    (b)   Disability.
      For the
      purposes of this Agreement, the term “Disability” shall mean Executive becoming
      incapacitated by accident, sickness, or other circumstance that renders him
      physically or mentally unable to carry out the duties and services required
      of
      him hereunder on a full-time basis for more than one hundred twenty (120) days
      in any one hundred eighty (180) day period. If a dispute arises between the
      Executive and the Company concerning the Executive’s physical or mental ability
      to continue or return to the performance of his duties as aforesaid, the
      Executive shall submit to examination by a competent physician mutually
      agreeable to both parties or, if the parties are unable to agree, by a physician
      appointed by the president of the Harris County Medical Association, and such
      physician’s opinion shall be final and binding.

    


    (c)   Cause.
      For
      purposes of this Agreement, the term “Cause” shall mean: 

    


    (i) 
         Executive’s
      conviction of a crime constituting a felony, or a misdemeanor involving moral
      turpitude;

    


    (ii)
         The
      commission by Executive, or participation in, an illegal act or acts that were
      intended to defraud Luby’s;

    


    (iii)   the
      willful refusal by Executive to fulfill the duties and responsibilities as
      Chief
      Executive Officer;

    


    (iv)   the
      breach by Executive of material provisions of this Agreement, a policy of
      Luby’s, or the code of conduct of Luby’s in each case after written notice from
      the Board of Directors and, if correctible, the failure to correct such breach
      within 30 days from the date such notice is given;

    


    (v)
   gross
      negligence or willful misconduct by Executive in the performance of his duties
      and obligations to Luby’s;

    


    (vi)   willful
      engagement by Executive in conduct known (or which should have been known)
      to be
      materially injurious to Luby’s.

    


    (d)   Good
      Reason.
      For
      purposes of this Agreement, “Good Reason” shall mean the occurrence of any of
      the following circumstances, without the consent of the Executive, unless such
      circumstances are remedied in all material respects by Luby’s 30 days after
      Luby’s receipt of written notice thereof given by the Executive:

    


    (i)   the
      material diminution in the nature, scope, or duties of the Executive or
      assignment of duties inconsistent with those of the Chief Executive Officer
      or a
      change in the location of the principal business office of the Company in which
      his services are to be carried out, to a place outside of Texas;

    


    (ii)   any
      breach of a material provision of this Agreement by Luby’s after written notice
      from Employee and, if correctible, the failure to correct such breach within
      30
      days from the date such notice is given; 


    
      
        
        

      

      
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    (iii)   within
      two years after sale by Luby’s of all or substantially all of its assets or the
      merger, share exchange, or other reorganization of Luby’s into or with another
      corporation or entity (with respect to which Luby’s does not survive), a
      diminution in employee benefits (including but not limited to medical, dental,
      life insurance, and long-term disability plans) and perquisites applicable
      to
      Executive from the greater of (A) the employee benefits and perquisites provided
      by Luby’s to executives with comparable duties or (B) the employee benefits and
      perquisites to which Executive was entitled immediately prior to the date on
      which a change in control occurs.

    


    (e)   Notice
      of Termination.
      If
      Luby’s or Executive desires to terminate Executive’s employment hereunder at any
      time prior to expiration of the Term, it or he shall do so by giving written
      notice to the other party that it or he has elected to terminate Executive’s
      employment hereunder and stating the proposed effective date and reason for
      such
      termination, provided that no such action shall alter or amend any other
      provisions hereof or rights arising hereunder.

    


    9.   Consequences
      of Termination.

    


    (a)   By
      Expiration.
      If
      Executive’s employment hereunder shall terminate upon expiration of the Term,
      then all compensation for periods subsequent to termination and all benefits
      to
      Executive hereunder, other than (i) the nonqualified stock option to purchase
      1,120,000 shares of Common Stock of Luby’s, with an exercise price per share
      equal to five dollars ($5.00) per share dated March 9, 2001 and (ii) any other
      equity based compensation awards granted to Executive by Luby’s (collectively,
      the “Awards”), each of which is governed by its own terms in such circumstances,
      shall terminate contemporaneously with termination of his
      employment.

    


    (b)   Death
      or Disability.
      If the
      Executive’s employment is terminated during the Term by reason of the
      Executive’s death or Disability, all Compensation and benefits to Executive
      under this Agreement, other than the Awards, each of which is governed by its
      own terms in such circumstances, shall terminate contemporaneously with the
      termination of employment and without further obligation to the Executive or
      the
      Executive’s legal representatives under the Agreement (other than payment of the
      Executive’s Base Salary in respect of the period through his date of death or
      termination for Disability).

    


    (c)   Termination
      by the Executive without Good Reason or by the Company For Cause.
      If the
      Executive’s employment is terminated by the Executive without Good Reason, or by
      the Company for Cause, all compensation and benefits to Executive under this
      Agreement, other than the Awards, each of which is governed by its own terms
      in
      such circumstances, shall terminate contemporaneously with such termination
      of
      employment and without further obligation to Executive or Executive’s legal
      representatives under this Agreement (other than payment of Executive’s Base
      Salary in respect of the period through his date of
      termination).


    
      
        
        

      

      
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    (d)   Termination
      by the Executive for Good Reason or by the Company without Cause.

    


    (i)   If
      the
      Executive’s employment is terminated by the Company without Cause or by the
      Executive for Good Reason, the Company shall be obligated to pay to, or make
      available to, the Executive Executive’s monthly Base Salary and benefits in
      effect on the date of termination for the remainder of the Term. The Executive
      shall have no obligation to seek other employment during any time period for
      which he may receive payment pursuant to this subsection (d), and in the
      event the Executive obtains other employment during such period, the Company’s
      obligations to make payments pursuant to this subsection (d) shall not be
      reduced. In the event that continued participation in any Luby’s benefit plan
      contemplated by Section 5(b)(i) hereof is for whatever reason impermissible
      during the remainder of the Term, Company shall arrange upon comparable terms
      benefits substantially equivalent to those that may not be so provided under
      the
      plan maintained by Luby’s. The parties agree that the payments provided for
      herein constitute part of the consideration provided by the Company for the
      Executive’s agreements contained in Section 6 hereof.

    


    (ii)   Notwithstanding
      clause (i) of this subsection (d), if, at any time during which the
      Executive would otherwise be entitled to receive any payment pursuant to clause
      (i) of subsection (d), the Executive engages in any activity or takes any action
      which would be prohibited under Sections 10 and 11 hereof, then the Executive
      shall be deemed to have irrevocably forfeited any right to receive any further
      payments pursuant to this Agreement, provided such forfeiture shall not limit
      Luby’s rights to seek to enforce such provision or to seek damages; provided,
      however, that the Awards and the benefits thereof shall not be in any way
      affected by this clause (d)(ii) of this Section 9.

    


    10.   Disclosure
      of Confidential Information.
      Executive acknowledges that Luby’s will disclose to Executive, or place
      Executive in a position to have access to or develop, trade secrets or
      Confidential Information of Luby’s or its affiliates, and shall entrust
      Executive with business opportunities of Luby’s or its affiliates, and shall
      place Executive in a position to develop business goodwill on behalf of Luby’s
      or its affiliates. Except to the extent required in the performance of his
      duties and obligations to Luby’s as expressly authorized herein, or by prior
      written consent of a duly authorized officer or director of Luby’s, Executive
      will not, directly or indirectly, at any time during his employment with Luby’s,
      or for 18 months subsequent to the termination thereof, for any reason
      whatsoever, with or without cause, breach the confidence reposed in him by
      Luby’s by using, disseminating, disclosing, divulging, or in any manner
      whatsoever disclosing or permitting to be divulged or disclosed in any manner
      Confidential Information to any person, firm, corporation, association, or
      other
      business entity. As used herein, the term “Confidential Information” means any
      and all information concerning ideas, concepts, products, processes, and
      services related to the business of Luby’s, including information relating to
      research, development, inventions, manufacture, purchasing, accounting,
      engineering, marketing, merchandising, or the selling of any product or products
      to any customers of Luby’s, disclosed to Executive or known by Executive as a
      consequence of or through his employment by Luby’s (or any parent, subsidiary or
      affiliated corporations of Luby’s) including, but not necessarily limited to,
      any person, firm, corporation, association, or other business entity with which
      Luby’s has any type of agency agreement, or any shareholders, directors, or
      officers of any such person, firm, corporation, association, or other business
      entity; provided, however, that Confidential Information shall not include
      information generally known in any industry in which Luby’s is or may become
      engaged during the term of this Agreement, information disclosed publicly by
      Luby’s or any information, ideas, products, processes, services, and concepts
      existing and known to Executive prior to his employment by Luby’s. On
      termination of employment with Luby’s, all documents, records, notebooks,
      e-mails, or similar repositories of or containing Confidential Information,
      including all copies of any documents, records, notebooks, e-mail, or similar
      repositories of or containing Confidential Information, then in Executive’s
      possession or in the possession of any third party under the control of
      Executive or pursuant to any agreement with Executive, whether prepared by
      Executive or any other person, firm, corporation, association, or other business
      entity, will be delivered to Luby’s by Executive.


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    11.   Noncompetition;
      Standstill.

    


    (a)   Executive
      recognizes and understands that in performing the responsibilities of his
      employment, he will occupy a position of fiduciary trust and confidence,
      pursuant to which he will develop and acquire experience and knowledge with
      respect to Luby’s business. It is the expressed intent and agreement of
      Executive and Luby’s that such knowledge and experience shall be used
      exclusively in the furtherance of the interests of Luby’s and not in any manner
      which would be detrimental to Luby’s interests. In consideration of the benefits
      herein, Executive therefore agrees that so long as he is employed by Luby’s and
      for the Covenant Period after termination of Executive’s employment, Executive
      will not directly or indirectly: 

    


    (i)   engage
      in
      any other “cafeteria-style” restaurant business (as defined in the resolution of
      the Board of Directors of the Company dated March 7, 2001 adopted in connection
      with Executive's initial employment by the Company) or own any interests whether
      as an owner, shareholder, joint venturer, partner or otherwise, in any other
      association or entity that engages, directly or indirectly, in any
“cafeteria-style” restaurant business in each case in any state where Luby’s or
      any of its affiliates are conducting business on the date of this Agreement
      or
      in any contiguous state; provided, however,
      that
      nothing herein shall prohibit Executive from holding or making passive
      investments in limited partnerships or corporations whose securities are traded
      in a generally recognized market provided that Executive’s interest, together
      with those of his affiliates and family do not exceed 1% of the outstanding
      shares or interests in such corporation or partnership; or

    


    (ii)   render
      advice or services to, or otherwise assist, any other person, association,
      or
      entity engaged, directly or indirectly, in any “cafeteria-style” restaurant
      business in any state where Luby’s or its affiliates conduct business on the
      date of this Agreement or in any contiguous state; or


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    (iii)   contact
      or solicit any employee of Luby’s or any of its affiliates to induce them to
      terminate his or her employment with Luby’s or such affiliates.

    


    (b)   Executive
      agrees that for so long as he is employed by Luby’s and for the Covenant Period
      he will not without the prior written consent of the Company:
      (i) knowingly, after due inquiry, sell any shares of Common Stock, or right
      to acquire Common Stock, to any person or group (as defined in Section 13(d)(3)
      of the Exchange Act , as amended, and the regulations promulgated thereunder)
      that would subsequent to such sale Beneficially Own in excess of 10% of the
      Company’s issued and outstanding Common Stock (1% in the case of industry
      competitors), (ii) solicit, or participate in a solicitation of proxies or
      votes
      or consents to vote any voting securities of the Company or grant (except to
      the
      Company or its representatives or representatives of the Executive) any proxies
      to vote such securities or subject their shares in the Company to any voting
      trust or other voting arrangement or agreement, (iii) form, join, or in any
      way
      participate in, any group (as defined in Section 13(d)(3) of the Exchange Act,
      as amended, and the regulations promulgated thereunder) with respect to voting
      securities of the Company, or (iv) seek, propose, or make any public statement
      regarding any merger, tender or exchange offer or other business combination
      involving the Company or any sale, assignment, transfer, lease or other
      disposition by the Company of all or substantially all of its assets; provided,
      however, the covenants contained in this subsection (b) shall terminate and
      shall be of no further force or effect upon the occurrence of a Change of
      Control.

    


    12.   Enforcement
      and Remedies.
      Executive understands that the restrictions set forth here may limit Executive’s
      ability to engage in certain businesses in certain geographic regions during
      the
      period provided for above, but acknowledges that Executive will receive
      sufficiently high remuneration and other benefits under this Agreement to
      justify such restriction. Executive acknowledges that money damages would not
      be
      sufficient remedy for any breach of Section 10 or 11 by Executive, and
      Luby’s shall be entitled to enforce the provisions thereof by terminating any
      payments then owing to Executive under this Agreement and/or by specific
      performance and injunctive relief as remedies for such breach or any threatened
      breach. Such remedies shall not be deemed the exclusive remedies for a breach,
      but shall be in addition to all remedies available at law or in equity to
      Luby’s, including without limitation, the recovery of damages from Executive and
      Executive’s agents involved in such breach and remedies available to Luby’s
      pursuant to other agreements with Executive.

    


    13.   Insurance.
      Luby’s
      may, in its sole and absolute discretion, at any time after the Effective Date,
      apply for and procure, as owner and for its own benefit, insurance on the life
      of Executive, in such amounts and in such forms as Luby’s may choose. Unless
      otherwise agreed by Luby’s, Executive shall have no interest whatsoever in any
      such policy or policies, but Executive shall, at Luby’s request, submit to such
      medical examinations, supply such information, and execute and deliver such
      documents as may be required by the insurance company or companies to which
      Luby’s has applied for such insurance. 


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    14.   Notice.
      All
      notices and communications hereunder shall be in writing and shall be deemed
      given if delivered personally or mailed by registered or certified mail (return
      receipt requested) to the parties at the following addresses (or at such other
      address for a party as shall be specified by like notice):

    


    
      	
              If
                to Executive:

            	
              Harris J.
                Pappas

            
	 	
              642
                Yale

            
	 	
              Houston,
                Texas 77007

            
	 	 
	
              with
                a copy to:

            	
              Frank
                Markantonis

            
	_____________________	
              645
                Heights Blvd.

            
	 	
              Houston,
                Texas 77007

            
	 	 
	
              and

            	
              Fulbright
                & Jaworski, L.L.P.

            
	 	
              1301
                McKinney Suite 5100

            
	 	
              Houston,
                Texas 77010-3095

            
	 	
              Attn:
                Charles H. Still

            
	 	 
	
              If
                to Luby’s:

            	
              Luby’s,
                Inc.

            
	 	
              13111
                Northwest Freeway, Suite 600

            
	 	
              Houston,
                Texas 77040

            
	 	
              Attention:
                

            	
              Chairman
                of the Board and

            
	 	 	
              General
                Counsel

            
	 	 
	 	 
	
              With
                a copy to:

            	
              Hornberger
                Sheehan Fuller & Beiter Incorporated

            
	 	
              7373
                Broadway, Suite 300

            
	 	
              San
                Antonio, Texas 78209

            
	 	
              Attention:
                Drew R. Fuller, Jr.

            


    

    


    Any
      of
      the above addresses may be changed at any time by notice given as provided
      above; provided, however, that any such notice of change of address shall be
      effective only upon receipt. All notices, requests or instructions given in
      accordance herewith shall be deemed received on the date of delivery, if hand
      delivered, on the date of receipt, if telecopied, three Business Days after
      the
      date of mailing, if mailed by registered or certified mail, return receipt
      requested, and one Business Day after the date of sending, if sent by Federal
      Express or other recognized overnight courier

    


    15.   CONTROLLING
      LAW.
      THIS
      AGREEMENT SHALL BE DETERMINED AND GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
      THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW
      PROVISIONS.

    


    16.   Additional
      Instruments.
      This
      Agreement governs the rights and obligations of Executive and Luby’s with
      respect to Executive’s base salary and certain perquisites of employment.
      Executive’s rights and obligations both during the term of his employment and
      thereafter with respect to stock options, life insurance policies insuring
      the
      life of Executive, and other benefits under the plans and programs maintained
      by
      Luby’s shall be governed by the separate agreements, plans, and other documents
      and instruments governing such matters. 


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    17.   Liquidated
      Damages.
      In
      light of the difficulties in estimating the damages for any early termination
      of
      employment, Luby’s and Executive hereby agree that the payments, if any, to be
      received by Executive pursuant to this Agreement shall be received by Executive
      as liquidated damages. Payment of the amounts set forth in this Agreement,
      if
      any, shall be in lieu of any severance benefit Executive may be entitled to
      under any severance plan or policy of Luby’s.

    


    18.   Severability.
      If any
      term or other provision of this Agreement is invalid, illegal, or incapable
      of
      being enforced by any rule of applicable law, or public policy, all other
      conditions and provisions of this Agreement shall nevertheless remain in full
      force and effect so long as the economic or legal substance of the transactions
      contemplated herein are not affected in any manner materially adverse to any
      party. Upon such determination that any term or other provision is invalid,
      illegal, or incapable of being enforced, the parties hereto shall negotiate
      in
      good faith to modify this Agreement so as to effect the original intent of
      the
      parties as closely as possible in a mutually acceptable manner in order that
      the
      transactions contemplated herein are consummated as originally contemplated
      to
      the fullest extent possible.

    


    19.   Miscellaneous.
      No
      provision of this Agreement may be modified, waived or discharged orally, but
      only by a waiver, modification or discharge in writing signed by the Executive,
      and such officer of the Company as may be designated by the Board. No waiver
      by
      either party hereto at any time of any breach by the other party hereto of,
      or
      compliance with, any condition or provision of this Agreement to be performed
      by
      such other party shall be deemed a waiver of similar or dissimilar provisions
      or
      conditions at the time or at any prior or subsequent time. No agreements or
      representations, oral or otherwise, express or implied, with respect to the
      subject matter hereof have been made by either party which are not expressly
      set
      forth in this Agreement. Wherever appropriate to the intention of the parties
      hereto, the respective rights and obligations of the parties hereto, will
      survive any termination or expiration of the term of this Agreement as
      specifically set forth herein; in addition Sections 9, 10, 11, 12, 14, 15,
      16,
      17, 18, 19, 20, 21 and 23 shall survive such termination or expiration to the
      extent the context thereof requires.

    


    20.   Entire
      Agreement.
      This
      Agreement (which term shall be deemed to include the exhibits hereto and any
      other certificates, documents or instruments delivered hereunder), the Purchase
      Agreement dated March 9, 2001 among the Company, Executives, and the other
      signatories thereto, as amended from time to time (the “Purchase Agreement”),
      and the other Transaction Documents (as defined in the Purchase Agreement)
      constitute the entire agreement of the Parties hereto and supercede all prior
      agreements and understandings, both written and oral, among the parties as
      to
      the subject matter hereof. There are no representations or warranties,
      agreements, or covenants other than those expressly set forth herein, in the
      Purchase Agreement and in the other Transaction Documents.

    


    21.   Effect
      of Agreement.
      This
      Agreement shall be binding upon Executive and his heirs, executors, legal
      representatives, successors and assigns, and Luby’s and its legal
      representatives, successors and assigns. Except as provided in the preceding
      sentence, this Agreement, and the rights and obligations of the Parties
      hereunder, are personal and neither this Agreement, nor any right, benefit,
      or
      obligation of either Party hereto, shall be subject to voluntary or involuntary
      assignment, alienation, or transfer, whether by operation of law or otherwise,
      without the prior written consent of the other Party.


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    22.   Execution.
      This
      Agreement may be executed and delivered (including by facsimile transmission)
      in
      one or more counterparts all of which shall be considered one and the same
      agreement and shall become effective when one or more counterparts have been
      signed by each of the parties and delivered to the other parties, it being
      understood that all parties need not sign the same counterpart. 

    


    23.   Deemed
      Resignations.
      Any
      termination of Executive’s employment shall constitute an automatic resignation
      as an officer and director of Luby’s and each subsidiary or affiliate of Luby’s.


    


    IN
      WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
      Date.

    


    


    
      	 	
              /s/Harris
                J. Pappas

            
	 	
              Harris J.
                Pappas

            
	 	 
	 	
              Luby’s,
                Inc.

            
	 	 
	 	 
	 	
              /s/Gasper
                Mir, III

            
	 	
              Gasper
                Mir, III

            
	 	
              Chairman
                of the Board

            


    

     

    
14