Exhibit 10(y)
AFFILIATE SERVICES AGREEMENT
This Affiliate Services Agreement ("Agreement"), entered into to be
effective as of August 31, 2001, between Harris J. Pappas, Christopher J.
Pappas, and each of the entities described on Exhibit "A" hereto (the "Pappas
Entities")(collectively, "Pappas"), and Luby's, Inc., a Delaware corporation
(the "Company").
WHEREAS, Pappas has provided, and will provide, corporate services to the
Company;
WHEREAS, the Company and Pappas wish to provide for the terms of payment
for such services; and
WHEREAS, to provide for the ongoing provision of Corporate Services (as
defined in paragraph 1 below) by Pappas to the Company and to express the term
of provisions of those Services, Pappas and the Company desire to enter into
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained in this Agreement, Pappas and the Company hereby agree as
follows:
1. Corporate Services To Be Made Available.
(a) For the period provided for under paragraph 6 hereof, Pappas
agrees to make available to the Company such services
(collectively, the "Corporate Services") as to which the
respective Chief Executive Officers of Pappas and the Company may
from time to time agree, on the terms provided herein. If the
same person serves as Chief Executive Officer of both parties,
such Chief Executive Officer may act singly hereunder on behalf of
both such parties.
(b) Without limiting the generality or flexibility of paragraph 1(a),
the Corporate Services shall initially consist of the following
services (the "Initial Services"):
(i) financial advice and services, including, without limitation,
assistance with respect to the raising of capital, investment
analysis, cash and treasury management, and risk management
services, to be provided by Pappas's treasury staff;
(ii) accounting, audit, payroll, and bookkeeping advice and
services, to be provided by Pappas's accounting staff;
(iii) office and warehouse space for maintenance and storage
facilities, to be leased from the Pappas Entities;
(iv) furniture and equipment, to be purchased from the Pappas
Entities;
(v) equipment and facilities maintenance services, to be provided
by the Pappas Entities; and
(vi) architectural and construction services, to be provided by
the Pappas Entities.
(c) For purposes of the avoidance of doubt, the Initial Services shall
constitute the Corporate Services unless and until modified in
accordance with the provisions of paragraph 1(a) or 6(a) of this
Agreement.
2. Standard of Conduct.
(a) In providing Corporate Services to the Company, Pappas's officers
and employees shall conduct themselves in accordance with the
Company's written policies and procedures and, shall provide the
Corporate Services with the same degree of care, skill and
prudence customarily exercised by such officers and employees for
the benefit of Pappas in connection with Pappas's operations.
Notwithstanding the foregoing, in providing the Corporate
Services, Pappas and its directors, officers and employees will
not be responsible for, and shall have no liability for, any
Losses (as defined below) arising out of the performance by Pappas
of the Corporate Services, except to the extent arising out of the
gross negligence or willful misconduct of Pappas or its directors,
officers or employees. Pappas shall indemnify, defend and hold
harmless the Company, its affiliates, and their respective
directors, officers and employees from and against any and all
Losses incurred by the Company arising as a result of the gross
negligence or willful misconduct of Pappas or its directors,
officers or employees in connection with the performance of the
Corporate Services hereunder, except in circumstances where the
party that would otherwise be indemnified hereunder is found by a
court of competent jurisdiction to have acted with gross
negligence or to have engaged in willful misconduct.
(b) The Company shall indemnify, defend and hold harmless Pappas, its
affiliates, and their respective directors, officers and employees
from and against any and all Losses incurred by Pappas arising as
a result of Pappas having provided Corporate Services, except in
circumstances where the party that would otherwise be indemnified
hereunder is found by a court of competent jurisdiction to have
acted with gross negligence or to have engaged in willful
misconduct.
(c) In no event shall Pappas, the Company, their respective
affiliates, or their respective directors, officers or employees
be liable for any indirect, special or consequential damages in
connection with or arising out of this Agreement.
(d) For purposes of this paragraph, the term "Losses" shall mean any
and all losses, liabilities, demands, claims, actions or causes of
action, assessments, losses, fines, penalties, costs, damages
and/or expenses (including, without limitation, the reasonable
fees and expenses of attorneys and other professionals).
3. Cost of Services.
(a) The parties hereby ratify the previously made determination of the
level of corporate services and the payments therefor provided by
Pappas prior to the effective date of this Agreement as detailed
on Exhibit "B" hereto for the Company's current fiscal year, and
the estimated fee and payment schedule therefor.
(b) Not less than thirty (30) days prior to each successive fiscal
year of the Company, Pappas and the Company shall estimate the
probable level of Corporate Services to be provided under this
Agreement for the fiscal year in question, and shall budget the
estimated amount of the fee to be paid by the Company to Pappas
therefor on the assumption that such estimated level of Corporate
Services will actually be provided. In determining each such
estimate and subsequent adjustment, Pappas and the Company shall
value Corporate Services based on Pappas's direct and indirect
costs allocable thereto, calculated in accordance with Pappas's
usual accounting practices. As soon as practicable after the end
of each of the Company's fiscal quarters (including the Company's
current fiscal quarter), Pappas and the Company shall, based on a
detailed review, determine the actual level of Corporate Services
rendered by Pappas during such fiscal quarter, and the Company
shall pay Pappas the applicable adjusted fee within 15 business
days of presentation of a statement therefor. Pappas shall cause
its employees to record or otherwise apportion the time they
devote in providing Corporate Services to the Company, in order to
facilitate such review and determination and to permit a proper
adjustment to be made.
(c) The Company also agrees to reimburse Pappas, within 15 business
days of presentation of invoices therefor, for all reasonable out-
of-pocket expenses incurred by Pappas in providing Corporate
Services, including reasonable expenses for outside professional
services incurred by Pappas for the benefit of the Company.
(d) The failure of the Company to make any payment to Pappas hereunder
within 30 days of the date such payment is due shall result in the
Company owing Pappas interest at the rate of 10% per annum on the
amount due from the date payable to the actual payment date.
4. Requirement of Approval By Finance and Audit Committee of the Board of
Directors of the Company. All determinations on behalf of the Company
made pursuant to paragraphs 3 and 6 hereof must be approved by the
Finance and Audit Committee of the Board of Directors of the Company
(the "Committee"). In carrying out its duties pursuant to this
Agreement, the Committee may retain such independent accountants,
lawyers and other experts as it deems necessary or prudent to retain,
and the expenses of all such professionals shall be reimbursed by the
Company.
5. Information and Witnesses. Pappas shall provide to the Company and the
Company shall provide to Pappas, upon the other's written request, at
reasonable times, full and complete access to, and duplication rights
with respect to, any and all Information, as defined below, as the
other may reasonably request and require, and Pappas shall use its best
efforts to make available to the Company, and the Company shall use its
best efforts to make available to Pappas, upon the other's written
request, the officers, directors, employees and agents of Pappas and of
the Company, respectively, as witnesses to the extent that such persons
may reasonably be required in connection with any legal, administrative
or other proceedings in which the Company or Pappas, as the case may
be, may from time to time be a party; provided, however, that neither
Pappas nor the Company need provide any Information or make available
witnesses to the other to the extent that doing so would (i)
unreasonably interfere with the performance by any person of such
person's duties to the party to which a request under this paragraph 5
is made or otherwise cause unreasonable burden to such party, (ii)
result in a waiver of any attorney-client or work product privilege of
such party or its legal counsel, (iii) require either Pappas or the
Company to provide any Information which relates to the subject matter
of any legal, administrative or other proceeding in which Pappas and
the Company are adverse parties, or (iv) result in any breach of any
agreement with a third party; and provided, further, that the party
providing Information or making available witnesses pursuant to this
paragraph 5 shall be entitled to receive from the other party, upon
presentation of reasonably detailed invoices therefor, payment of its
reasonable out-of-pocket costs (including, without limitation, the
reasonable fees and expenses of attorneys and other professionals)
incurred in connection with providing Information or making witnesses
available. The term Information as used in this paragraph 5 means any
books, records, contracts, instruments, data, facts and other
information in the possession or under the control of either Pappas or
the Company and necessary or desirable for use in legal, administrative
or other proceedings or for auditing, accounting or tax purposes.
6. Term of Agreement.
(a) This Agreement shall become effective as of the date hereof, and
shall continue in effect thereafter unless terminated with respect
to the performance of Corporate Services in whole or in part by
either party upon not less than 30 days written notice.
Termination of Corporate Services in part shall not result in the
termination of this Agreement. Termination of Corporate Services
in whole shall result in the termination of this Agreement except
that the obligations of the parties under paragraphs 2, 3, 4, 5,
6, 8 and 9 shall continue after such termination.
(b) Notwithstanding the foregoing, Pappas shall have the right (but
not the obligation) to terminate this Agreement immediately and
without the requirement of notice at any time upon the first to
occur of the date on which (i) the Company sells, or enters into a
definitive agreement to sell, all or substantially all of its
assets to any one or more persons (other than Pappas), (ii) the
Company merges, or enters into a definitive agreement to merge,
with any person other than Pappas, or (iii) any person or group of
persons (other than Pappas) acquires the right (as a consequence
of share ownership, contractual right or otherwise) to elect or
designate a majority of the board of directors of the Company.
(c) Upon termination of this Agreement in part, an appropriate
revision of fees shall be made.
(d) Upon termination of this Agreement in whole, a final fee
adjustment on the basis described in paragraph 3(b) shall be made
within 60 days.
7. Independence. All employees and representatives of Pappas providing
the Corporate Services to the Company will be deemed for purposes of
all compensation and employee benefits to be employees or
representatives of Pappas and not employees or representatives of the
Company. Except to the extent such employees and representatives are
elected officers of the Company, in performing such services such
employees and representatives will be under the direction, control and
supervision of Pappas (and not of the Company) and Pappas will have the
sole right to exercise all authority with respect to the employment
(including termination of employment), assignment and compensation of
such employees and representatives.
8. Independent Contractor. The relationship of Pappas to the Company
which is created hereunder is that of an independent contractor. This
Agreement is not intended to create and shall not be construed as
creating between the Company and Pappas the relationship of affiliate,
principal and agent, joint venture, partnership, or any other similar
relationship, the existence of which is hereby expressly denied.
9. Confidentiality. Any and all information which is not generally known
to the public which is exchanged between the parties in connection with
the performance of this Agreement, whether of a technical or business
nature, shall be considered to be confidential. The parties agree that
confidential information shall not be disclosed to any third party or
parties without the written consent of the other party, except as
permitted below. Each party shall take reasonable measures to protect
against disclosure of confidential information by its officers,
employees and agents. Confidential information shall not include any
information (i) which is or becomes part of the public domain other
than as a result of the breach of a party's obligation hereunder, (ii)
which is obtained from third parties who are not bound by
confidentiality obligations or (iii) which is required to be disclosed
by law, under compulsion of legal process, or by the rules of any state
or Federal regulatory agency or any securities exchange (including
NASDAQ) on which the Company's or Pappas's securities might be listed
for trading. The provisions of this paragraph shall survive the
termination of this Agreement.
10. Miscellaneous.
(a) Nonassignability of Agreement. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, whether
by operation of law or otherwise, by either party hereto without
the prior written consent of the other (which consent may be
withheld in the sole discretion of the party whose consent is
required), and any attempt to assign any rights or obligations
arising under this Agreement without such consent shall be void;
provided, however, that the provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by Pappas
and the Company and their respective successors and permitted
assigns.
(b) Further Assurances. Subject to the provisions hereof, each of the
parties hereto shall make, execute, acknowledge and deliver such
other actions and documents as may be reasonably required in order
to effectuate the purposes of this Agreement, and to comply with
all applicable laws, regulations, orders and decrees, and obtain
all required consents and approvals and make all required filings
with any governmental agency, other regulatory or administrative
agency, commission or similar authority, as may be reasonably
necessary or desirable in this connection.
(c) Waivers. No failure or delay on the part of Pappas or the Company
in exercising any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right, or any abandonment or discontinuance of steps to enforce
such a right, preclude any other or further exercise thereof or
the exercise of any other right. No modification or waiver of any
provision of this Agreement nor consent to any departure by Pappas
or the Company therefrom shall in any event be effective unless
the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the
purpose for which given. Any consent or waiver by the Company
under this paragraph 10(c) must be approved by the Independent
Committee.
(d) Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the transactions
contemplated hereby.
(e) Amendments. Except as provided in paragraph 1 with respect to
changes in the level of Corporate Services which may be agreed by
the respective Chief Executive Officers of Pappas and the Company
without approval of or authorization by their respective Boards of
Directors and Section 6(a) with respect to the termination of the
provision of Corporate Services in whole or in part by the
Company, this Agreement may be amended or supplemented only in
writing executed by the parties hereto under authorization by
their respective Boards of Directors (including, in the case of
the Company, the approval of the Independent Committee).
(f) Notices. All notices, approvals and other communications provided
for herein shall be validly given, made or served, if in writing
and delivered personally, by telegram or be telephonic facsimile
transmission, or sent by registered mail, postage prepaid, to:
The Company:
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:
Harris J. Pappas
642 Yale
Houston, Texas 77007
with a copy to:
Frank Markantonis
645 Heights Blvd.
Houston, Texas 77007
and shall become effective upon receipt.
(g) Governing Law. Despite any different result required by any
conflicts of law provisions, this Agreement shall be governed by
the laws of the Commonwealth of Massachusetts.
(h) Force Majeure. Anything else in this Agreement notwithstanding,
Pappas shall be excused from performance hereunder while, and to
the extent that, its performance is prevented by fire, drought,
explosion, flood, invasion, rebellion, earthquake, civil
commotion, strike or labor disturbance, governmental or military
authority, act of God, mechanical failure or any other event or
casualty beyond the reasonable control of Pappas, whether similar
or dissimilar to those enumerated in this paragraph. In the event
of any of the foregoing occurrences, the Company shall be
responsible for making its own alternative arrangements with
respect to the interrupted services.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first above written.
/s/Harris J. Pappas
_________________________
Harris J. Pappas
/s/Christopher J. Pappas
_________________________
Christopher J. Pappas
LUBY'S, INC.
By:
Name:
Its:
Exhibit "A"
List of Pappas Entities providing services
(See attached)
Exhibit "B"
List of Services provided to date
and the amounts owed to date
(See attached)
Exhibit "B"
Corporate Services - Affiliate Services Agreement
See Section 1.(b) in agreement
Fiscal Year Ended August 31, 2001
________________________________________________________________________________
March - August Incurred Paid Outstanding
Professional Services and Consulting Fees $ 47,463 - $ 47,463
Out-of-Pocket 3,932 - 3,932
Equipment and other Restaurant-
Related Services 200,460 (84,257) 116,203
Lease Cost (Houston Service Center) -
Crockett St. Property 19,500 - 19,500
________ _______ _______
Total $271,355 (84,257) 187,098
________ _______ _______
Budget Estimate - 1st Quarter Ended November 21, 2001
________________________________________________________________________________
September - November Estimate
Professional Services and Consulting Fees $ 22,500
Out-of-Pocket 1,000
Equipment and other Restaurant-
Related Services 175,000
Houston Service Center Rent Expense 19,500
________
Total $218,000
________