-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TW2AEhBxM3QdtelwE/PKOX77fVQ/oJSmIZ95aP0ialaF/+TFgc1wxz/yeGgFMFck IviZQdWdD8vPfXNr6o0YhQ== 0000016099-96-000016.txt : 19961202 0000016099-96-000016.hdr.sgml : 19961202 ACCESSION NUMBER: 0000016099-96-000016 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961126 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LUBYS CAFETERIAS INC CENTRAL INDEX KEY: 0000016099 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 741335253 STATE OF INCORPORATION: TX FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08308 FILM NUMBER: 96672230 BUSINESS ADDRESS: STREET 1: 2211 NE LOOP 410 STREET 2: P O BOX 33069 CITY: SAN ANTONIO STATE: TX ZIP: 78265-3069 BUSINESS PHONE: 2106549000 FORMER COMPANY: FORMER CONFORMED NAME: CAFETERIAS INC DATE OF NAME CHANGE: 19810126 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended August 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _________________ to ______________________ Commission file number: 1-8308 LUBY'S CAFETERIAS, INC. ______________________________________________________________________________ (Exact name of registrant as specified in its charter) Delaware 74-1335253 _________________________ ___________________________________ (State of Incorporation) (I.R.S. Employer Identification No.) 2211 Northeast Loop 410 Post Office Box 33069 San Antonio, Texas 78265-3069 Area Code 210 654-9000 _______________________________________ _______________________________ (Address of principal executive office) (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: Name of exchange on Title of Class which registered ______________ ______________________ Common Stock ($.32 par value) New York Stock Exchange Common Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ____ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the shares of Common Stock of the registrant held by non-affiliates of the registrant as of November 15, 1996, was approximately $476,448,000 (based upon the assumption that directors and officers are the only affiliates). As of November 15, 1996, there were 23,271,600 shares of the registrant's Common Stock outstanding, exclusive of 4,131,467 treasury shares. Portions of the following documents are incorporated by reference into the designated parts of this Form 10-K: annual report to shareholders for the fiscal year ended August 31, 1996 (in Part II) and proxy statement relating to 1997 annual meeting of shareholders (in Part III). Item 1. Business. Luby's Cafeterias, Inc. (the "Company") operates 221 cafeterias under the name "Luby's" located in suburban shopping areas in Arizona, Arkansas, Florida, Kansas, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Tennessee, and Texas. Of the 221 cafeterias operated by the Company, 128 are at locations owned by the Company and 93 are on leased premises. Luby's Cafeterias, Inc. was originally incorporated in Texas in 1959 and was reincorporated in Delaware on December 31, 1991. The Company's executive offices are at 2211 Northeast Loop 410, P. O. Box 33069, San Antonio, Texas 78265-3069. Marketing The Company's product strategy is to provide a wide variety of freshly- prepared foods in an attractive and informal environment. The Company's research has shown that its products appeal to a broad range of value-oriented consumers with particular success among senior citizens, families with children, shoppers, and business people looking for a quick, healthy meal at a reasonable price. Prior to 1991 the Company relied primarily on customers' word-of-mouth recommendations and community relations activities to promote its business, spending approximately .5% of sales annually on these efforts. In 1991 the Company began developing a new marketing program. Based on favorable results of radio and television advertising tests, the marketing budget increased to approximately two percent of sales for fiscal 1996. The Company intends to continue expending the majority of the marketing budget on television and radio advertising, as well as supporting the increased local marketing activities of the individual cafeterias. Operations The Company's operations combine the food quality and atmosphere of a good restaurant with the simplicity and visual food selection of cafeteria service. Food is prepared in small quantities throughout serving hours, and frequent quality checks are made. Each cafeteria offers a broad and varied menu and normally serves 12 to 14 entrees, 12 to 14 vegetable dishes, 22 to 25 salads, and 18 to 20 desserts. The Company's cafeterias cater primarily to shoppers and office or store personnel for lunch and to families for dinner. The Company's cafeterias are open for lunch and dinner seven days a week. All of the cafeterias sell take-out orders, and most of them have separate food to go entrances. Take- out orders accounted for approximately ten percent of sales in fiscal 1996. Each cafeteria is operated as a separate unit under the control of a manager who has responsibility for day-to-day operations, including food purchasing, menu planning, and personnel employment and supervision. Each cafeteria manager is compensated on the basis of his or her cafeteria's profits. Management believes that granting broad authority to its cafeteria managers and compensating them on the basis of their performance are significant factors in the profitability of its cafeterias. Of the 221 cafeteria managers employed by the Company, 166 have been with the Company for more than ten years. Generally, an individual is employed for a period of seven to ten years before he or she is considered qualified to become a cafeteria manager. Each cafeteria cooks or prepares substantially all of the food served, including breads and pastries. The cafeterias prepare food from the same recipes, with minor variations to suit local tastes, although menus are not uniform in all of the Company's cafeterias on any particular day. Menus are prepared to reflect local and seasonal food preferences and to take advantage of any special food purchasing opportunities. Substantially all of the food served by each cafeteria is purchased from local suppliers. None of the cafeterias are dependent upon any one supplier, and the Company believes that alternative sources of supply are readily available. Quality control teams, each consisting of experienced cooks and a supervisor, help to maintain uniform standards of food preparation. The teams primarily assist in the training of new personnel during the opening of new cafeterias. The teams also visit the cafeterias periodically and work with the regular staffs to check adherence to the Company's recipes, train personnel in new techniques, and evaluate procedures for possible use throughout the Company. The Company conducts a training program comprised of both on-the-job training and classroom instruction in its training facilities in San Antonio. The training program is approximately three months in duration. Management personnel receive one week of classroom instruction and spend the remaining time on practical training in operating cafeterias. In order to draw management trainees from regional talent pools, the Company has set up satellite training schools in several key cafeterias to make on-the-job training more accessible on a local level. As of August 31, 1996, the Company had approximately 11,680 employees, consisting of 10,890 nonmanagement cafeteria personnel; 659 cafeteria managers, associate managers, and assistant managers; and 131 executive, administrative, and clerical personnel. Employee relations are considered to be good, and the Company has never had a strike or work stoppage. Expansion During the fiscal year ended August 31, 1996, the Company relocated one cafeteria in Port Arthur, Texas, closed one cafeteria in El Paso, Texas, and opened 18 new cafeterias in Surprise, Arizona; Wichita, Kansas; Nashville, Tennessee; and Arlington, Corpus Christi, Dallas, Fort Worth, Houston, Kerrville, McKinney, San Antonio, and Tomball, Texas; for a net increase of 17 units for the fiscal year. On September 16, 1996, the Company acquired from Triangle FoodService Corporation (formerly Wyatt Cafeterias, Inc.) 20 cafeteria locations, consisting of 12 owned sites and 8 leased locations. On October 2, 1996, the Company opened 15 of those units as "Luby's" cafeterias, located in Hot Springs, Arkansas; Joplin, Missouri; and Abilene, Dallas, Del Rio, Houston, Irving, Jacinto City, Laredo, McAllen, Mesquite, and Rosenberg, Texas. In addition, since August 31, 1996, the Company has relocated a cafeteria in Longview, Texas, and opened two new cafeterias in College Station and San Antonio, Texas. Ten new cafeterias are under construction in Peoria and Phoenix, Arizona; Little Rock, Arkansas; St. Petersburg, Florida; Albuquerque, New Mexico; Memphis, Tennessee; and Mesquite and San Antonio, Texas. During fiscal 1997, the Company expects to open in excess of 30 new cafeterias, including the reopened units acquired from Triangle FoodService Corporation. The Company continually evaluates prospective new cafeteria sites and typically has several sites for new cafeterias under active consideration at any given time. The rate at which new cafeterias are opened is governed by the Company's policy of controlled growth, which takes into account the resources and capabilities of all departments involved, including real estate, construction, equipment, and operations. It has been the Company's experience that new cafeterias generally become profitable within three months after opening. The costs of opening new cafeterias vary widely, depending on whether the facilities are to be leased or owned, and if owned, on site acquisition and construction costs. The Company estimates that in recent years it has cost $2,300,000 to $2,600,000 to construct, equip, and furnish a new cafeteria in a freestanding building under normal conditions, including land acquisition costs. The approximate cost to finish out, equip, and furnish a new cafeteria in a leased facility has ranged from $1,200,000 to $1,400,000. A new building prototype is now being utilized to reduce the initial investment in a typical new location. Waterstreet Joint Venture In January 1996 the Company announced a joint venture agreement with Waterstreet, Inc., a seafood restaurant company operating in Corpus Christi, Fort Worth, and San Antonio, Texas. The Company plans to build three "Water Street Seafood Company" restaurants during fiscal 1997. They will be leased to the joint venture and operated by Waterstreet, Inc. One joint venture restaurant was opened in San Antonio in August 1996. Service Marks The Company uses several service marks, including "Luby's" and believes that such marks are of material importance to its business. The Company has federal service mark registrations for several of such marks. The Company is not the sole user of the name "Luby's" in the cafeteria business. One cafeteria using the name "Luby's" and one cafeteria using the name "Pat Luby's" are being operated in two different cities in Texas by two different owners not affiliated with the Company. The Company's legal counsel is of the opinion that the Company has the paramount right to use the name "Luby's" as a service mark in the cafeteria business in the United States and that such other users can be precluded from expanding their use of the name as a service mark. Competition and Other Factors The food service business is highly competitive, and there are numerous restaurants and other food service operations in each of the markets where the Company operates. The quality of the food served, in relation to its price, and public reputation are important factors in food service competition. Neither the Company nor any of its competitors has a significant share of the total market in any area in which the Company competes. The Company believes that its principal competitors are conventional restaurants and other cafeterias. The Company's facilities and food products are subject to state and local health and sanitation laws. In addition, the Company's operations are subject to federal, state, and local regulations with respect to environmental and safety matters, including regulations concerning air and water pollution and regulations under the Americans with Disabilities Act and the Federal Occupational Safety and Health Act. Such laws and regulations, in the Company's opinion, have not materially affected its operations, although compliance has resulted in some increased costs. Item 2. Properties. The Company owns the underlying land and buildings in which 128 of its cafeterias are located. In addition, the Company owns several cafeteria sites being held for future development. Of the 221 cafeterias operated by the Company, 93 are at locations held under leases, including 51 in regional shopping malls. Most of the leases provide for a combination of fixed-dollar and percentage rentals. Most of the leases require the lessee to pay additional amounts related to property taxes, hazard insurance, and maintenance of common areas. See Notes 4 and 7 of Notes to Financial Statements for information concerning the Company's lease rental expenses, lease commitments, and construction commitments. Of the 93 cafeteria leases, the current terms of 26 expire from 1997 to 2001, 25 from 2002 to 2006, and 42 thereafter. Seventy-six of the leases can be extended beyond their current terms at the Company's option. A typical cafeteria seats 250 to 300 guests and contains 9,000 to 10,500 square feet of floor space. A new building prototype is now being utilized for new store openings in the latter part of fiscal 1997 which contains approximately 8,000 square feet and seats 220 guests. Most of the cafeterias are located in modern buildings and all are in good condition. It is the Company's policy to refurbish and modernize cafeterias as necessary to maintain their appearance and utility. The equipment in all cafeterias is well maintained. Several of the Company's cafeteria properties contain excess building space which is rented to tenants unaffiliated with the Company. The 221 cafeterias operated by the Company are located as follows (locations are in Texas except as otherwise indicated): Number Number Location of Units Location of Units Abilene 2 Lubbock 1 Albuquerque, New Mexico 2 Lufkin 1 Amarillo 2 McAllen 3 Arlington 3 McKinney 1 Austin 6 Memphis, Tennessee 3 Bartlesville, Oklahoma 1 Mesa, Arizona 2 Baytown 1 Mesquite 2 Beaumont 1 Midland 1 Bedford 1 Mission, Kansas 1 Bellmead 1 Mission, Texas 1 Bossier City, Louisiana 1 Morristown, Tennessee 1 Broken Arrow, Oklahoma 1 Murfreesboro, Tennessee 1 Brownsville 2 Muskogee, Oklahoma 1 Bryan/College Station 2 Nashville, Tennessee 3 Carrollton 1 New Braunfels 1 Chandler, Arizona 1 North Little Rock, Arkansas 1 Clearwater, Florida 1 Oak Ridge, Tennessee 1 Conroe 1 Odessa 1 Corpus Christi 4 Okalahoma City, Oklahoma 3 Dallas 13 Pasadena 1 Deer Park 1 Pharr 1 Del Rio 1 Phoenix, Arizona 4 Denton 1 Pinellas Park, Florida 1 DeSoto 1 Plano 2 Duncanville 1 Port Arthur 2 El Paso 5 Richardson 1 Fayetteville, Arkansas 1 Rosenberg 1 Fort Smith, Arkansas 1 Round Rock 1 Fort Worth 9 San Angelo 1 Franklin, Tennessee 1 San Antonio 21 Galveston 1 San Marcos 1 Garland 1 Santa Fe, New Mexico 1 Glendale, Arizona 1 Scottsdale, Arizona 1 Grand Prairie 1 Sebring, Florida 1 Grapevine 1 Shawnee, Oklahoma 1 Harlingen 2 Sherman 1 Hattiesburg, Mississippi 1 Shreveport, Louisiana 1 Hot Springs, Arkansas 1 Stafford 1 Houston 31 Sugar Land 1 Humble 1 Surprise, Arizona 1 Independence, Missouri 1 Tampa, Florida 2 Irving/Las Colinas 2 Temple 1 Jacinto City 1 Texarkana 1 Joplin, Missouri 1 The Woodlands 1 Kansas City, Missouri 2 Tomball 1 Kerrville 1 Topeka, Kansas 1 Killeen 1 Tucson, Arizona 2 Kingwood 1 Tulsa, Oklahoma 2 Lake Jackson 1 Tyler 2 Laredo 2 Victoria 1 Las Cruces, New Mexico 1 Waco 1 Leavenworth, Kansas 1 Weslaco 1 Lewisville 1 Wichita, Kansas 2 Little Rock, Arkansas 1 Longview 1 The Company's corporate offices are located in a building owned by the Company containing approximately 40,000 square feet of office space. The Company utilizes the space for its executive offices and related facilities. The Company maintains public liability insurance and property damage insurance on its properties in amounts which management believes to be adequate. Item 3. Legal Proceedings. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party, or of which any of its property is the subject. There are no material legal proceedings to which any director, officer, or affiliate of the Company, or any associate of any such director or officer, is a party, or has a material interest, adverse to the Company. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted during the fourth quarter of the fiscal year ended August 31, 1996, to a vote of security holders of the Company. Item 4A. Executive Officers of the Registrant. Certain information is set forth below concerning the executive officers of the Company, each of whom has been elected to serve until the 1997 annual meeting of shareholders and until his successor is duly elected and qualified. Served as Officer Positions with Company and Name Since Principal Occupation Last Five Years Age ________________________ ________ ____________________________________ ___ Ralph Erben 1978 Chairman of the Board (since Jan. 65 1996), Chief Executive Officer, Chairman of the Executive Committee, and Director; President prior to Jan. 1996. John E. Curtis, Jr. 1982 President, Chief Operating Officer 49 (since Jan. 1996), Chief Financial Officer, member of the Executive Committee, and Director; Senior Vice President 1988-1995; Treasurer 1990-1995. William E. Robson 1982 Executive Vice President-Operations 55 and Director (since 1993); Senior Vice President-Operations 1992-1995; Senior Vice President-Operations Development prior to 1992. Clyde C. Hays III 1985 Senior Vice President-Operations 45 (since Jan. 1996); Vice President- Operations 1993-1995; Area Vice President prior to 1993. Jimmy W. Woliver 1984 Senior Vice President-Operations 59 (since Jan. 1996); Vice President- Operations prior to 1996. Ronald E. Riemenschneider 1990 Vice President and Treasurer (since 38 1995); Controller 1990-1995. James R. Hale 1980 Secretary; Member of law firm of 67 Cauthorn Hale Hornberger Fuller Sheehan & Becker Incorporated since 1992; member of law firm of Cox & Smith Incorporated prior to 1992. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. Stock Prices and Dividends The Company's common stock is traded on the New York Stock Exchange under the symbol LUB. The following table sets forth, for the last two fiscal years, the high and low sales prices on the New York Stock Exchange from the consolidated transaction reporting system and the per share cash dividends declared on the common stock. Fiscal Quarters Quarterly Ended High Low Cash Dividend _________________ ______ ______ ______________ November 30, 1994 $24.63 $22.00 $.165 February 28, 1995 23.25 22.00 .165 May 31, 1995 22.88 18.50 .165 August 31, 1995 21.25 19.25 .18 November 30, 1995 22.88 19.88 .18 February 29, 1996 23.00 20.13 .18 May 31, 1996 25.25 20.38 .18 August 31, 1996 25.25 22.50 .20 As of September 13, 1996, there were approximately 4,142 record holders of the Company's common stock. Item 6. Selected Financial Data. Five Year Summary of Operations (Thousands of dollars except per share data) Years ended August 31,
1996 1995 1994 1993 1992 ________ ________ ________ ________ ________ Sales $450,128 $419,024 $390,692 $367,757 $346,359 Costs and expenses: Cost of food 110,008 103,611 98,223 92,957 86,507 Payroll and related costs 124,333 113,952 104,543 99,233 95,963 Occupancy and other operating expenses 132,595 123,907 113,546 104,958 99,590 General and administrative expenses 20,217 18,672 15,330 15,967 15,101 ________ ________ ________ ________ ________ 387,153 360,142 331,642 313,115 297,161 Income from operations 62,975 58,882 59,050 54,642 49,198 Other income (expenses): Interest expense (2,130) (1,749) - - - Interest and other 1,697 1,805 1,385 1,574 1,319 ________ ________ ________ ________ ________ (433) 56 1,385 1,574 1,319 ________ ________ ________ ________ ________ Income before income taxes and accounting change 62,542 58,938 60,435 56,216 50,517 Provision for income taxes 23,334 21,923 22,663 20,687 17,924 ________ ________ ________ ________ ________ Income before accounting change 39,208 37,015 37,772 35,529 32,593 Cumulative effect of change in accounting for income taxes - - 1,563 - - ________ ________ ________ ________ ________ Net income (a) $ 39,208 $ 37,015 $ 39,335 $ 35,529 $ 32,593 Income per share before accounting change $ 1.66 $ 1.55 $ 1.45 $ 1.31 $ 1.19 Net income per common share $ 1.66 $ 1.55 $ 1.51 $ 1.31 $ 1.19 Cash dividend declared per common share $ .74 $ .68 $ .62 $ .56 $ .51 At year-end: Total assets $335,290 $312,380 $289,668 $302,099 $276,319 Long-term debt $ 41,000 $ - $ - $ - $ 1,384 Number of cafeterias 204 187 176 168 162 (a) Net income in 1994 includes the cumulative effect of change in accounting for income taxes of $1,563, or $.06 per share.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources During the last three years the Company has funded all capital expenditures from internally-generated funds, cash equivalents, short-term borrowings, and long-term debt. Capital expenditures for fiscal 1996 were $48,529,000, a 30% increase from fiscal 1995. This increase in capital expenditures resulted from the opening of 19 new cafeterias in fiscal 1996, including one relocation, as compared to 12 in fiscal 1995, which also included one relocation. In addition, the Company also purchased eight sites as land held for future use compared to ten land sites purchased during fiscal 1995. Capital commitments budgeted for fiscal 1997 include the purchase of 20 cafeteria locations from Triangle FoodService Corporation, formerly Wyatt Cafeterias, Inc., for approximately $14 million in cash. On October 2, 1996, 15 of these locations opened as "Luby's." Capital expenditures during fiscal 1997 to repair and refurbish these units will range from $2 million to $3 million. In addition to these locations, plans for fiscal 1997 include the opening of approximately 15 new cafeterias: seven on sites owned by the Company, two on land held under long-term ground leases, and six in regional shopping malls. In addition, two existing units will be relocated: one from a neighborhood shopping center to a regional mall, and one from a leased premise to a freestanding cafeteria on land held under a long-term ground lease. Therefore, a net increase of approximately 30 cafeterias is anticipated in fiscal 1997. As part of a joint venture agreement with Waterstreet, Inc. signed in January 1996, the Company also plans to build three seafood restaurants during fiscal 1997: two on sites owned by the Company and one on land held under a long-term ground lease. These "Water Street Seafood Company" restaurants will be leased by the joint venture from the Company and operated by Waterstreet, Inc. In addition, as of August 31, 1996, the Company owned 11 undeveloped cafeteria sites, and several land site acquisitions were in varying stages of negotiation. As a result of all the capital commitments discussed above, the Company expects a substantial increase in the total capital expenditures for fiscal 1997. Construction costs for the new cafeterias and seafood restaurants are expected to be funded by cash flow from operations, cash currently held in cash equivalent investments, and long-term debt. The Company generated cash from operations of $60,354,000 in fiscal 1996. The Company had a balance of $41,000,000 outstanding at August 31, 1996, under a $100,000,000 credit facility with a syndication of four banks. At August 31, 1996, the Company had a working capital deficit of $35,096,000 which compares to the prior year's working capital deficit of $79,316,000. The working capital position improved during fiscal 1996 due primarily to the renegotiation of the short-term facility to long-term debt. The Board of Directors authorized the purchase in the open market of up to 1,000,000 shares of the Company's outstanding common stock through December 31, 1997. During fiscal 1996 the Company purchased 252,200 shares of its common stock at a cost of $5,997,000, which are being held as treasury stock. The Company believes that funds generated from operations and short-term or long-term financing from external sources, which can be obtained on terms acceptable to the Company, are adequate for its foreseeable needs. Results of Operations Fiscal 1996 Compared to Fiscal 1995 Sales increased $31,104,000, or 7%, due in part to the addition of 18 new cafeterias in fiscal 1996 and 11 cafeterias in fiscal 1995. The average sales volume of cafeterias opened over one year increased slightly to $2,332,000 in fiscal 1996 from $2,321,000 in fiscal 1995 due primarily to higher average tray prices over the prior year. The same-store customer count trend was negative for the first time since 1992. This decline was not wholly unexpected because all but four of the current year openings occurred in existing markets. Accordingly, our market share improved in these areas; however, customer traffic and sales at established cafeterias were negatively impacted. This, combined with increased competition and the lack of full recovery from the peso devaluation in fiscal 1995, resulted in the negative same-store customer count trend. Cost of food increased $6,397,000, or 6%, due primarily to the increase in sales. Food cost margins improved from the price increase on the Lu Ann Platter, which took effect on December 1, 1995. Payroll and related costs increased $10,381,000, or 9%, due primarily to the increase in sales, higher wages for hourly employees in existing cafeterias, and higher wage costs associated with increased expansion over the prior year. As the expansion rate increases for fiscal 1997 and the new Federal minimum wage increases effective October 1, 1996, the Company anticipates that payroll and related costs will increase as a percentage of sales over fiscal 1996. The Company implemented a 3% to 4% price increase on September 15, 1996, to help offset the pressure on profit margins. Occupancy and other operating expenses increased $8,688,000, or 7%, due primarily to the increase in sales and the opening of 18 new cafeterias. Since all preopening costs are expensed as incurred, the preopening expense amount included in occupancy and other operating expenses for fiscal 1997 will significantly increase due to the higher expansion rate, especially in the first quarter. During fiscal 1997 the Company plans to maintain the budget for advertising expense at 25 of sales. General and administrative expenses increased $1,545,000, or 8%, due primarily to two additional area vice president positions, higher management trainee salaries, and higher moving expenses, all associated with the increased expansion. Interest expense of $2,130,000 for fiscal 1996 was incurred in conjunction with borrowings under the credit facility and is net of $1,100,000 capitalized on qualifying properties. The increase over fiscal 1995 of $381,000, or 22%, was due to higher average outstanding borrowings. The provision for income taxes increased $1,411,000, or 6%, due to higher income before income taxes. The Company's effective income tax rate increased slightly from 37.2% in fiscal 1995 to 37.3% in fiscal 1996. Fiscal 1995 Compared to Fiscal 1994 Sales increased $28,332,000, or 7%, due in part to the addition of 11 new cafeterias in fiscal 1995 and eight cafeterias in fiscal 1994. The average sales volume of cafeterias opened over one year increased to $2,321,000 in fiscal 1995 from $2,287,000 in fiscal 1994. The increase resulted from the implementation of new marketing programs and from higher average tray prices over the prior year. Cost of food increased $5,388,000, or 5%, due primarily to the increase in sales. Food cost margins improved from the price increase on the Lu Ann Platter, which took effect on December 1, 1994, and an additional price increase on selected individual items effective June 10, 1995. Payroll and related costs increased $9,409,000, or 9%, due primarily to the increase in sales, higher wages for hourly employees in existing cafeterias, and higher wage costs associated with increased expansion over the prior year. Occupancy and other operating expenses increased $10,361,000, or 9%, due primarily to the increase in sales, the opening of 11 new cafeterias, higher advertising expenditures, higher costs for a new uniform program, and higher costs for paper supplies. General and administrative expenses increased $3,342,000, or 22%, due primarily to the higher Company contribution to the profit sharing and retirement plan as determined by the plan's provisions, which increased approximately $3,000,000 over fiscal 1994. Interest expense for fiscal 1995 was incurred in conjunction with borrowings under the line-of-credit agreement and is net of $895,000 capitalized on qualifying properties. The provision for income taxes decreased $740,000, or 3%, due in part to lower income before income taxes. The Company's effective income tax rate decreased slightly from 37.5% in fiscal 1994 to 37.2% in fiscal 1995. Inflation The Company's policy is to maintain stable menu prices without regard to seasonal variations in food costs. General increases in costs of food, wages, supplies, and services make it necessary for the Company to increase its menu prices from time to time. To the extent prevailing market conditions allow, the Company intends to adjust menu prices to maintain profit margins. Item 8. Financial Statements and Supplementary Data. LUBY'S CAFETERIAS, INC. FINANCIAL STATEMENTS Years Ended August 31, 1996, 1995, and 1994 with Report of Independent Auditors Report of Independent Auditors The Board of Directors and Shareholders Luby's Cafeterias, Inc. We have audited the accompanying balance sheets of Luby's Cafeterias, Inc. at August 31, 1996 and 1995, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended August 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Luby's Cafeterias, Inc. at August 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 1996, in conformity with generally accepted accounting principles. As discussed in Note 6 to the financial statements, in 1994 the Company changed its method of accounting for income taxes. ERNST & YOUNG LLP San Antonio, Texas October 1, 1996 Luby's Cafeterias, Inc. Balance Sheets August 31 1996 1995 ________ _______ (Thousands of Dollars) Assets Current assets: Cash and cash equivalents $ 2,687 $ 12,392 Trade accounts and other receivables 541 311 Food and supply inventories 4,517 4,034 Prepaid expenses 3,195 2,849 Deferred income taxes 418 629 ________ ________ Total current assets 11,358 20,215 Investments and other assets - at cost: Land held for future use 8,040 9,820 Other assets 4,303 3,188 ________ ________ Total investments and other assets 12,343 13,008 Property, plant, and equipment - at cost, less accumulated depreciation and amortization 311,589 279,157 ________ ________ Total assets $335,290 $312,380 ________ ________ Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings $ - $ 57,000 Accounts payable - trade 14,568 10,969 Dividends payable 4,796 4,196 Accrued expenses and other liabilities 24,336 24,895 Income taxes payable 2,754 2,471 ________ ________ Total current liabilities 46,454 99,531 Deferred income taxes and other credits 22,163 20,145 Commitments - - Shareholders' equity: Common stock, $.32 par value; authorized 100,000,000 shares, issued 27,403,067 shares 8,769 8,769 Paid-in capital 26,945 26,945 Retained earnings 267,374 248,973 Less cost of treasury stock, 3,425,525 shares in 1996 and 4,089,935 shares in 1995 (77,415) (91,983) ________ ________ Total shareholders' equity 225,673 192,704 ________ ________ Total liabilities and shareholders' equity $335,290 $312,380 ________ ________ See accompanying notes. Luby's Cafeterias, Inc. Statements of Income Years Ended August 31 1996 1995 1994 ________ ________ ________ (Thousands of dollars except per share data) Sales $450,128 $419,024 $390,692 Costs and expenses: Cost of food 110,008 103,611 98,223 Payroll and related costs 124,333 113,952 104,543 Occupancy and other operating expenses 132,595 123,907 113,546 General and administrative expenses 20,217 18,672 15,330 ________ ________ ________ 387,153 360,142 331,642 ________ ________ ________ Income from operations 62,975 58,882 59,050 Interest expense (2,130) (1,749) - Other income, net 1,697 1,805 1,385 ________ ________ ________ Income before income taxes and cumulative effect of change in method of accounting for income taxes 62,542 58,938 60,435 Provision for income taxes: Current 20,940 21,750 18,909 Deferred 2,394 173 3,754 ________ ________ ________ 23,334 21,923 22,663 ________ ________ ________ Income before cumulative effect of change in method of accounting for income taxes 39,208 37,015 37,772 Cumulative effect of change in method of accounting for income taxes - - 1,563 ________ ________ ________ Net income $ 39,208 $ 37,015 $ 39,335 ________ ________ ________ Earnings per share: Income before cumulative effect of change in method of accounting for income taxes $ 1.66 $ 1.55 $ 1.45 Cumulative effect of change in method of accounting for income taxes - - .06 ________ ________ ________ Net income per share $ 1.66 $ 1.55 $ 1.51 ________ ________ ________ See accompanying notes. Luby's Cafeterias, Inc. Statements of Shareholders' Equity
Common Stock Total Issued Treasury Paid-In Retained Shareholders' Shares Amount Shares Amount Capital Earnings Equity __________________________________________________________________________________________ (Amounts in thousands except per share data) Balance at August 31, 1993 27,403 $ 8,769 (176) $(3,072) $ 27,037 $206,214 $238,948 Net income for the year - - - - - 39,335 39,335 Common stock issued under stock option plan, net of shares tendered in partial payment - - 159 3,360 (92) (744) 2,524 Cash dividends, $.615 per share - - - - - (15,791) (15,791) Purchases of treasury stock - - (2,268) (51,490) - - (51,490) ______ ______ ______ _______ _______ _______ _______ Balance at August 31, 1994 27,403 8,769 (2,285) (51,202) 26,945 229,014 213,526 Net income for the year - - - - - 37,015 37,015 Common stock issued under employee bene- fit plans, net of shares tendered in partial payment - - 195 4,395 - (1,086) 3,309 Cash dividends, $.675 per share - - - - - (15,970) (15,970) Purchases of treasury stock - - (2,000) (45,176) - - (45,176) ______ ______ ______ _______ _______ _______ _______ Balance at August 31, 1995 27,403 8,769 (4,090) (91,983) 26,945 248,973 192,704 Net income for the year - - - - - 39,208 39,208 Common stock issued under employee bene- fit plans, net of shares tendered in partial payment and including tax benefits - - 916 20,565 - (3,218) 17,347 Cash dividends, $.74 per share - - - - - (17,589) (17,589) Purchases of treasury stock - - (252) (5,997) - - (5,997) ______ ______ ______ _______ _______ _______ _______ Balance at August 31, 1996 27,403 $ 8,769 (3,426) $(77,415) $ 26,945 $267,374 $225,673 ______ ______ ______ _______ _______ _______ _______ See accompanying notes.
Luby's Cafeterias, Inc. Statements of Cash Flows Years Ended August 31 1996 1995 1994 ________ ________ ________ (Thousands of dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 39,208 $ 37,015 $ 39,335 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,693 16,417 15,700 Cumulative effect of change in method of accounting - - (1,563) (Gain) loss on disposal of land held for future use - (106) 69 (Gain) loss on disposal of property, plant, and equipment 31 (313) 23 ________ ________ ________ Cash provided by operating activities before changes in operating assets and liabilities 56,932 53,013 53,564 Changes in operating assets and liabilities: (Increase) decrease in trade accounts and other receivables (230) (36) 327 Increase in food and supply inventories (483) (183) (425) Increase in prepaid expenses (346) (9) (373) Increase in other assets (1,115) (353) (460) Increase (decrease) in accounts payable - trade 2,441 1,368 (87) Increase (decrease) in accrued expenses and other liabilities (337) 3,082 (4,832) Increase (decrease) in income taxes payable 1,263 (479) 157 Increase (decrease) in deferred income taxes and other credits 2,229 (5) 4,275 _______ ________ ________ Net cash provided by operating activities 60,354 56,398 52,146 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposal of land held for future use - 495 955 Proceeds from disposal of property, plant, and equipment 153 474 182 Purchases of land held for future use (5,776) (7,531) (3,470) Purchases of property, plant, and equipment (42,753) (29,715) (26,252) _______ ________ ________ Net cash used in investing activities (48,376) (36,277) (28,585) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common under stock option plans 16,145 3,196 2,524 Net proceeds (payments) of short-term borrowings (57,000) 40,000 17,000 Proceeds from long-term debt 268,000 - - Reductions of long-term debt (227,000) - - Purchases of treasury stock (4,839) (45,916) (50,750) Dividends paid (16,989) (15,918) (15,731) _______ _______ _______ Net cash used in financing activities (21,683) (18,638) (46,957) _______ _______ _______ Net increase (decrease) in cash and cash equivalents (9,705) 1,483 (23,396) Cash and cash equivalents at beginning of year 12,392 10,909 34,305 ________ ________ ________ Cash and cash equivalents at end of year $ 2,687 $ 12,392 $ 10,909 ________ ________ ________ See accompanying notes. Luby's Cafeterias, Inc. Notes to Financial Statements August 31, 1996, 1994, and 1994 1. Significant Accounting Policies Nature of Operations Luby's Cafeterias, Inc. (the Company), based in San Antonio, Texas, owns and operates cafeterias in the southern United States. As of August 31, 1996, the Company operated a total of 204 units. The Company locates its cafeterias convenient to shopping and business developments as well as to residential areas. Accordingly, the cafeterias cater primarily to shoppers, store and office personnel at lunchtime, and to families at dinner. Inventories The food and supply inventories are stated at the lower of cost (first-in, first-out) or market. Depreciation and Amortization The Company depreciates the cost of plant and equipment over their estimated useful lives using both straight-line and accelerated methods. Leasehold improvements are amortized over the related lease lives, which are in some cases shorter than the estimated useful lives of the improvements. Long-Lived Assets In March 1995, the Financial Accounting Standards Board (FASB) issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement 121 in the first quarter of 1997 and, based on current circumstances, does not believe the effect of adoption will be material. Statement of Cash Flows For purposes of the statement of cash flows, the Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. Preopening Expenses New store preopening costs are expensed as incurred. Advertising Expenses Advertising costs are expensed as incurred. Income Taxes Deferred income taxes are computed using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities (temporary differences) and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Stock Options Proceeds from the sale of common stock issued under the stock option plans and related tax benefits which accrue to the Company are accounted for as capital transactions, and no charges or credits are made to income in connection with the plans. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from these estimates. 2. Property, Plant, and Equipment The cost and accumulated depreciation of property, plant, and equipment at August 31, 1996 and 1995, together with the related estimated useful lives used in computing depreciation and amortization, are reflected below: Estimated 1996 1995 Useful Lives ________ ________ _______________ (Thousands of dollars) Land $ 74,699 $ 66,405 - Cafeteria equipment and furnishings 117,227 106,540 3 to 10 years Buildings 209,404 181,389 20 to 40 years Leasehold and leasehold improvements 46,403 43,752 Term of leases Office furniture and equipment 2,536 2,271 5 to 10 years Transportation equipment 688 674 5 years Construction in progress 7,506 9,225 - ________ ________ 458,463 410,256 Less accumulated depreciation and amortization 146,874 131,099 ________ ________ $311,589 $279,157 ________ ________ Total interest expense incurred for 1996, 1995, and 1994 was $3,230,000, $2,644,000, and $288,000, respectively, which approximated the amount paid in each year. The amounts capitalized on qualifying properties in 1996, 1995, and 1994 were $1,100,000, $895,000, and $288,000, respectively. 3. Debt As of August 31, 1995, $57,000,000 in short-term borrowings was outstanding under a $100 million line-of-credit which expired in December 1995. The weighted average interest rate for short-term borrowings based on the number of days outstanding was 6.4% for 1995. During 1996 the Company entered into a new $100 million credit facility with a syndication of four banks. As part of this credit facility, the Company has a revolving credit agreement which allows borrowings for varying periods through February 27, 2001, at the lower of the prime rate or other rate options available at the time of borrowing. The credit facility includes a maximum commitment for letters of credit of $20 million. The Company pays a facility fee of .1% on the total commitment. The credit facility contains business covenants which, among other things, impose certain financial restrictions on the Company relating primarily to leverage and net worth. As of August 31, 1996, the balance outstanding under the revolving credit agreement was $41 million at an interest rate of 5.7%. At August 31, 1996, letters of credit of approximately $4,244,000 have been issued as security for the payment of insurance obligations classified as accrued expenses on the balance sheet. 4. Leases The Company conducts a major part of its operations from facilities which are leased under noncancelable lease agreements. Most of the leases are for periods of ten to 25 years and provide for contingent rentals based on sales in excess of a base amount. Approximately 80% of the leases contain renewal options ranging from five to 30 years. Annual future minimum lease payments under noncancelable operating leases as of August 31, 1996, are as follows: (Thousands of dollars) Years ending August 31: 1997 $ 6,386 1998 6,570 1999 6,623 2000 6,470 2001 6,231 Thereafter 52,516 _______ Total minimum lease payments $84,796 _______ Total rent expense for operating leases for the years ended August 31, 1996, 1995, and 1994 was as follows: 1996 1995 1994 ________ ________ ________ (Thousands of dollars) Minimum rentals $ 5,807 $ 5,477 $ 5,141 Contingent rentals 1,126 1,229 1,436 ________ ________ ________ $ 6,933 $ 6,706 $ 6,577 ________ ________ ________ 5. Employee Benefit Plans and Agreements Incentive Compensation The Company has various incentive compensation plans covering officers and other key employees that are based upon the achievement of specified earnings goals and performance factors. Awards under the plans are payable in cash and/or in shares of common stock. Charges to expense for current and future distributions under the plans amounted to $400,000, $431,000, and $1,481,000 in 1996, 1995, and 1994, respectively. During the years ended August 31, 1996, 1995, and 1994, 10,590, 4,820, and -0- shares of common stock were issued under the plans out of treasury stock, respectively. Stock Option Plans The Company had an Employee Stock Option Plan for executive and other key salaried employees. Under the terms of the stock option plan, nonqualified options and incentive stock options totaling 225,000 shares of the Company's common stock could be granted at prices not less than 100% of fair market value at date of grant. Options were exercisable for such periods as the Compensation Committee determined, but not for more than ten years from date of grant. All options outstanding under this plan either expired or were exercised as of August 31, 1995. In 1990 the Company adopted a new Management Incentive Stock Plan to replace the Employee Stock Option Plan and to provide for market-based incentive awards, including stock options, stock appreciation rights, restricted stock, and performance share awards. Under the terms of the Management Incentive Stock Plan, nonqualified options and incentive stock options totaling 2,700,000 shares of the Company's common stock are reserved for grants to the officer group, certain administrative personnel, and cafeteria management personnel. Stock options may be granted at prices not less than 100% of fair market value at date of grant. Options granted to the participants of the plan are exercisable over staggered periods and expire, depending upon the type of grant, in five to seven years. The plan provides for various vesting methods, depending upon the category of personnel. Following is a summary of activity in the stock option plans for the three years ended August 31, 1996, 1995, and 1994:
Common Option Price Shares Options Options Per Share Reserved Outstanding Exercisable ________________ _________ ___________ ___________ Balances - August 31, 1993 $14.83 to $23.25 2,654,694 1,876,169 212,434 Granted 21.75 to 21.75 - 370,725 - Became exercisable 15.00 to 23.25 - - 246,327 Cancelled or expired 15.00 to 23.25 - (139,294) (41,633) Exercised 14.83 to 17.88 (191,366) (191,366) (191,366) _________ _________ _______ Balances - August 31, 1994 15.00 to 23.25 2,463,328 1,916,234 225,762 Granted 22.75 to 23.75 - 136,100 - Became exercisable 15.00 to 23.75 - - 582,379 Cancelled or expired 15.00 to 23.75 - (95,467) (43,552) Exercised 15.00 to 21.75 (209,753) (209,753) (209,753) _________ _________ _______ Balances - August 31, 1995 15.00 to 23.75 2,253,575 1,747,114 554,836 Granted 21.00 to 21.63 - 223,648 - Became exercisable 15.00 to 23.75 - - 1,167,766 Cancelled or expired 16.42 to 23.75 - (53,415) (38,903) Exercised 15.00 to 23.25 (980,600) (980,600) (980,600) _________ _________ ________ Balances - August 31, 1996 $15.00 to $23.75 1,272,975 936,747 703,099 _________ _________ ________
Deferred Compensation Deferred compensation agreements exist for several key management employees, all of whom are current or former officers. Under the agreements, the Company is obligated to provide for each such employee or his beneficiaries, during a period of ten years after the employee's death, disability, or retirement, annual benefits ranging from $15,500 to $43,400. The estimated present value of future benefits to be paid is being accrued over the period from the effective date of the agreements until the expected retirement dates of the participants. The net expense incurred for this plan for the years ended August 31, 1996, 1995, and 1994 amounted to $239,000, $79,000, and $78,000, respectively. The Company also has a Supplemental Executive Retirement Plan (SERP) for key executives and officers. The SERP is a "target" benefit plan, with the annual lifetime benefit based upon a percentage of average salary during the final five years of service at age 65, offset by several sources of income including benefits payable under deferred compensation agreements, if applicable, the profit sharing plan, and Social Security. SERP benefits will be paid from the Company's assets. The net expense incurred for this plan for the year ended August 31, 1996, was $80,000, and the unfunded accumulated benefit obligation as of August 31, 1996, was approximately $250,000. Profit Sharing The Company has a profit sharing plan and retirement trust covering substantially all employees who have attained the age of 21 years and have completed one year of continuous service. The plan is administered by a corporate trustee, is a "qualified plan" under Section 401(a) of the Internal Revenue Code, and provides for the payment of the employee's vested portion of the plan upon retirement, termination, disability, or death. The plan is funded by contributions of a portion of the net earnings of the Company. The plan provides that for each fiscal year in which the Company's net income (before income taxes and before any contribution to the plan) meets certain minimum standards, the Company is obligated to contribute to the plan, at a minimum, an amount equal to a defined percentage of the participants' compensation. In no event will the required contribution exceed 10% of the Company's income before income taxes and before any contribution to the plan. The Company's annual contribution to the plan amounted to $5,100,000, $4,888,000, and $1,886,000, for 1996, 1995, and 1994, respectively. 6. Income Taxes The Company adopted FASB Statement No. 109, "Accounting for Income Taxes," in 1994. The effect of the change on pretax income from continuing operations for the year ended August 31, 1994, was not material; however, the cumulative effect of the change increased net income in fiscal 1994 by $1,563,000, or $.06 per share. The tax effect of temporary differences results in deferred income tax assets and liabilities as of August 31 as follows: 1996 1995 ________ ___________ (Thousands of dollars) Deferred tax liabilities: Amortization of capitalized interest $ 494 $ 522 Depreciation and amortization 19,085 17,566 Deferred compensation (779) (766) Other 1,083 378 _______ _______ Total deferred tax liabilities 19,883 17,700 Deferred tax asset: Workers' compensation insurance 418 629 _______ _______ Net deferred tax liabilities $19,465 $17,071 _______ _______ The reconciliation of the provision for income taxes to the expected income tax expense (computed using the statutory tax rate) is as follows: 1996 1995 1994 Amount % Amount % Amount % _______ ____ _______ ____ _______ ____ (Thousands of dollars and as a percent of pretax income) Normally expected income tax expense $21,890 35.0% $20,628 35.0% $21,152 35.0% State income taxes 1,488 2.4 1,616 2.7 1,625 2.7 Jobs tax credits (1) - (151) (.2) (260) (.4) Other differences (43) (.1) (170) (.3) 146 .2 _______ ____ _______ ____ ______ ____ $23,334 37.3% $21,923 37.2% $22,663 37.5% _______ ____ _______ ____ ______ ____ Cash payments for income taxes for 1996, 1995, and 1994 were $19,677,000, $22,229,000, and $18,752,000, respectively. 7. Commitments At August 31, 1996, the Company had seven cafeterias under construction. The aggregate unexpended costs under the construction contracts were approximately $5,469,000. The Company has unconditionally guaranteed a $2,000,000 loan under a line of credit for an unrelated limited partnership in exchange for advertising rights and a participation in future profits of the venture. 8. Common Stock In 1991 the Board of Directors adopted a Shareholder Rights Plan and declared a dividend of one common stock purchase right for each outstanding share of common stock. The rights are not initially exercisable. The rights may become exercisable under circumstances described in the Plan if any person or group (an Acquiring Person) becomes the beneficial owner of 15% or more of the common stock. Once the rights become exercisable, each right will be exercisable to purchase, for $27.50 (the Purchase Price), one-half of one share of common stock, par value $.32 per share, of the Company. If any person becomes the beneficial owner of 15% or more of the common stock, each right will entitle the holder, other than the Acquiring Person, to purchase for the Purchase Price a number of shares of the Company's common stock having a market value of four times the Purchase Price. The Board of Directors authorized the purchase in the open market of up to 1,000,000 shares of the Company's outstanding common stock through December 31, 1997. During 1996 the Company purchased 252,200 shares of its common stock at a cost of $5,997,000, which are being held as treasury stock. 9. Per Share Information The weighted average number of shares used in the net income per share computation was 23,688,813 for 1996, 23,908,087 for 1995, and 25,981,840 for 1994. 10. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities at August 31 consisted of: 1996 1995 _______ _______ (Thousands of dollars) Salaries and bonuses $ 6,185 $ 7,542 Rent 777 841 Taxes, other than income 5,742 4,886 Profit sharing plan 5,057 4,888 Insurance 6,273 6,417 Other 302 321 _______ _______ $24,336 $24,895 _______ _______ 11. Quarterly Financial Information (Unaudited) The following is a summary of quarterly unaudited financial information for 1996 and 1995: Three Months Ended November 30, February 29, May 31, August 31, 1995 1996 1996 1996 ________ ________ ________ _________ (Thousands of dollars except per share data) Sales $108,337 $108,835 $117,132 $115,824 Gross profit 51,027 52,634 57,140 54,986 Net income 8,565 9,322 10,964 10,357 Net income per share .37 .40 .46 .43 Three Months Ended November 30, February 28, May 31, August 31, 1994 1995 1995 1995 ________ ________ ________ _________ (Thousands of dollars except per share data) Sales $101,446 $100,570 $106,899 $110,109 Gross profit 48,361 48,446 51,523 53,131 Net income 8,683 8,582 9,907 9,843 Net income per share .35 .36 .42 .42 12. Subsequent Event On September 16, 1996, the Company purchased the assets of 20 cafeteria locations from Triangle FoodService Corporation, formerly Wyatt Cafeterias, Inc., for approximately $14 million in cash. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. There is incorporated in this Item 10 by reference that portion of the Company's definitive proxy statement for the 1997 annual meeting of shareholders appearing therein under the captions "Election of Directors" and "Information Concerning Directors and Executive Officers." See also the information in Item 4A of Part I of this Report. Item 11. Executive Compensation. There is incorporated in this Item 11 by reference that portion of the Company's definitive proxy statement for the 1997 annual meeting of shareholders appearing therein under the caption "Executive Compensation." Item 12. Security Ownership of Certain Beneficial Owners and Management. There is incorporated in this Item 12 by reference that portion of the Company's definitive proxy statement for the 1997 annual meeting of shareholders appearing therein under the captions "Principal Shareholders" and "Management Shareholders." Item 13. Certain Relationships and Related Transactions. There is incorporated in this Item 13 by reference that portion of the Company's definitive proxy statement for the 1997 annual meeting of shareholders appearing therein under the caption "Certain Relationships and Related Transactions." PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Documents. 1. Financial Statements The following financial statements are filed as part of this Report: Balance sheets at August 31, 1996 and 1995 Statements of income for each of the three years in the period ended August 31, 1996 Statements of shareholders' equity for each of the three years in the period ended August 31, 1996 Statements of cash flows for each of the three years in the period ended August 31, 1996 Notes to financial statements Report of independent auditors 2. Financial Statement Schedules All schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements and notes thereto. 3. Exhibits The following exhibits are filed as a part of this Report: 2 - Agreement and Plan of Merger dated November 1, 1991, between Luby's Cafeterias, Inc., a Texas corporation, and Luby's Cafeterias, Inc., a Delaware corporation (filed as Exhibit 2 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). 3(a) - Certificate of Incorporation of Luby's Cafeterias, Inc., a Delaware corporation, as in effect February 28, 1994 (filed as Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 3(b) - Amendment to Bylaws of Luby's Cafeterias, Inc. adopted July 12, 1996. 3(c) - Bylaws of Luby's Cafeterias, Inc. as currently in effect. 4(a) - Description of Common Stock Purchase Rights of Luby's Cafeterias, Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991, File No. 1-8308, and incorporated herein by reference). 4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). 4(c) Amendment No. 2 dated February 7, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). 4(d) Amendment No. 3 dated May 29, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1995, and incorporated herein by reference). 4(e) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). 10(a) - Form of Deferred Compensation Agreement entered into between Luby's Cafeterias, Inc. and various officers (filed as Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1981, and incorporated herein by reference). 10(b) - Annual Incentive Plan for Area Vice Presidents of Luby's Cafeterias, Inc. adopted October 19, 1983 (filed as Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1983, and incorporated herein by reference). 10(c) - Incentive Bonus Plan of Luby's Cafeterias, Inc. adopted October 19, 1983 (filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1983, and incorporated herein by reference). 10(d) - Performance Unit Plan of Luby's Cafeterias, Inc. approved by the shareholders on January 12, 1984 (filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1984, and incorporated herein by reference). 10(e) - Employment Contract dated January 8, 1988, between Luby's Cafeterias, Inc. and George H. Wenglein (filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1988, and incorporated herein by reference). 10(f) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1989, and incorporated herein by reference). 10(g) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference). 10(h) - Nonemployee Director Stock Option Plan of Luby's Cafeterias, Inc. approved by the shareholders on January 13, 1995 (filed as Exhibit 10(h) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). 10(i) - Employment Contract dated January 12, 1996, between Luby's Cafeterias, Inc. and John B. Lahourcade (filed as Exhibit 10(i) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). 10(j) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated May 30, 1996. 10(k) - Luby's Cafeterias, Inc. Welfare Benefit Plan Trust dated July 18, 1996. 11 - Statement re computation of per share earnings. 21 - Subsidiaries of Luby's Cafeterias, Inc. 99(a) - Consent of Ernst & Young LLP. (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the last quarter of the period covered by this Report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 26, 1996 LUBY'S CAFETERIAS, INC. (Registrant) By: JOHN E. CURTIS, JR. ___________________________ John E. Curtis, Jr., President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature and Date Name and Title RALPH ERBEN Ralph Erben, Chairman _______________________________ of the Board, Chief Executive November 26, 1996 Officer, and Director JOHN E. CURTIS, JR. John E. Curtis, Jr., President, _______________________________ Chief Operating Officer, Chief November 26, 1996 Financial Officer, and Director WILLIAM E. ROBSON William E. Robson, Executive Vice ________________________________ President-Operations, and Director November 26, 1996 RONALD E. RIEMENSCHNEIDER Ronald E. Riemenschneider, Vice ________________________________ President, Treasurer, and November 26, 1996 Principal Accounting Officer LAURO F. CAVAZOS Lauro F. Cavazos, Director ________________________________ November 26, 1996 DAVID B. DAVISS David B. Daviss, Director ________________________________ November 26, 1996 ROGER R. HEMMINGHAUS Roger R. Hemminghaus, Director ________________________________ November 26, 1996 JOHN B. LAHOURCADE John B. Lahourcade, Director ________________________________ November 26, 1996 WALTER J. SALMON Walter J. Salmon, Director ________________________________ November 26, 1996 GEORGE H. WENGLEIN George H. Wenglein, Director ________________________________ November 26, 1996 JOANNE WINIK Joanne Winik, Director ________________________________ November 26, 1996 EXHIBIT INDEX Exhibit Page 2 - Agreement and Plan of Merger dated November 1, 1991, between Luby's Cafeterias, Inc., a Texas corporation, and Luby's Cafeterias, Inc., a Delaware corporation (filed as Exhibit 2 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). 3(a) - Certificate of Incorporation of Luby's Cafeterias, Inc., a Delaware corporation, as in effect February 28, 1994 (filed as Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 3(b) - Amendment to Bylaws of Luby's Cafeterias, Inc. adopted July 12, 1996. 3(c) - Bylaws of Luby's Cafeterias, Inc. as currently in effect. 4(a) - Description of Common Stock Purchase Rights of Luby's Cafeterias, Inc., in Form 8-A (filed April 17, 1991, effective April 26, 1991, File No. 1-8308, and incorporated herein by reference). 4(b) - Amendment No. 1 dated December 19, 1991, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991, and incorporated herein by reference). 4(c) Amendment No. 2 dated February 7, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). 4(d) Amendment No. 3 dated May 29, 1995, to Rights Agreement dated April 16, 1991 (filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1995, and incorporated herein by reference). 4(e) - Credit Agreement dated February 27, 1996, among Luby's Cafeterias, Inc., Certain Lenders, and NationsBank of Texas, N.A. (filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). 10(a) - Form of Deferred Compensation Agreement entered into between Luby's Cafeterias, Inc. and various officers (filed as Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1981, and incorporated herein by reference). 10(b) - Annual Incentive Plan for Area Vice Presidents of Luby's Cafeterias, Inc. adopted October 19, 1983 (filed as Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1983, and incorporated herein by reference). 10(c) - Incentive Bonus Plan of Luby's Cafeterias, Inc. adopted October 19, 1983 (filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1983, and incorporated herein by reference). 10(d) - Performance Unit Plan of Luby's Cafeterias, Inc. approved by the shareholders on January 12, 1984 (filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1984, and incorporated herein by reference). 10(e) - Employment Contract dated January 8, 1988, between Luby's Cafeterias, Inc. and George H. Wenglein (filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1988, and incorporated herein by reference). 10(f) - Management Incentive Stock Plan of Luby's Cafeterias, Inc. (filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1989, and incorporated herein by reference). 10(g) - Nonemployee Director Deferred Compensation Plan of Luby's Cafeterias, Inc. adopted October 27, 1994 (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference). 10(h) - Nonemployee Director Stock Option Plan of Luby's Cafeterias, Inc. approved by the shareholders on January 13, 1995 (filed as Exhibit 10(h) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by reference). 10(i) - Employment Contract dated January 12, 1996, between Luby's Cafeterias, Inc. and John B. Lahourcade (filed as Exhibit 10(i) to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996, and incorporated herein by reference). 10(j) - Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan dated May 30, 1996. 10(k) - Luby's Cafeterias, Inc. Welfare Benefit Plan Trust dated July 18, 1996. 11 - Statement re computation of per share earnings. 21 - Subsidiaries of Luby's Cafeterias, Inc. 99(a) - Consent of Ernst & Young LLP. EX-3 2 AMENDMENT TO BYLAWS [3(B)] AND BYLAWS [3(C)] Exhibit 3(b) LUBY'S CAFETERIAS, INC. RESOLUTIONS OF BOARD OF DIRECTORS July 12, 1996 Bylaw Amendment RESOLVED: That Section 1 of Article III of the Bylaws of Luby's Cafeterias, Inc. is hereby amended by adding thereto the following: Candidates to stand for election as directors at an annual meeting of stockholders shall be nominated by the Board of Directors; and candidates may also be nominated by any stockholder of record entitled to vote at the meeting, provided the stockholder gives timely notice thereof. To be timely, such notice shall be delivered in writing to the Secretary of the Corporation at the principal executive offices of the Corporation not later than 90 days prior to the date of the meeting of stockholders at which directors are to be elected and shall include (i) the name and address of the stockholder who intends to make the nomination, (ii) the name, age, and business address of each nominee, and (iii) such other information with respect to each nominee as would be required to be disclosed in a proxy solicitation relating to an election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934. Exhibit 3(c) BYLAWS OF LUBY'S CAFETERIAS, INC. ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Time and Place of Meeting. All meetings of the stockholders shall be held at such time and at such place within or without the State of Delaware as shall be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. An annual meeting of the stockholders shall be held each year on such date and at such time as shall be designated from time to time by the Board of Directors, and stated in the notice of the meeting, at which meeting the stockholders shall elect, in accordance with the Certificate of Incorporation, a board of directors and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of the stockholders, for any proper purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation of the Corporation, may be called at any time by (a) the Board of Directors, (b) the President or (c) the holders of at least fifty percent of all shares entitled to vote at the proposed special meeting. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice of the meeting. Section 4. Notice. Written or printed notice stating the place, date and hour of any meeting of stockholders, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the person calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his address as it appears on the stock ledger of the Corporation. Section 5. Record Date. The Board of Directors may fix in advance a record date for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such record date to be not less than 10 nor more than 60 days prior to such meeting; or the Board of Directors may close the stock ledger for a stated period which shall not exceed 60 days and shall be for at least 10 days immediately preceding such meeting. In the absence of any action by the Board of Directors, the date upon which the notice of the meeting is mailed shall be the record date. Section 6. List of Stockholders. The officer or agent of the Corporation having charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list, for a period of 10 days prior to such meeting, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine such list or stock ledger, or to vote at any meetings of stockholders. Section 7. Quorum. The holders of a majority of the capital stock issued and outstanding and entitled to be cast thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time until a quorum shall be present or represented without notice of the adjourned meeting other than announcement of the time and place thereof at the meeting at which the adjournment is taken. When any adjourned meeting is reconvened and a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 8. Voting. When a quorum is present at any meeting, the vote of the holders of the shares present or represented by proxy at such meeting and representing a majority of the votes entitled to be cast by each class of stock shall decide any question brought before such meeting, unless the vote of a different number is expressly required by statute, the Certificate of Incorporation or these Bylaws. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 9. Proxy. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share having voting power held by such stockholder. Every proxy must be executed in writing (which shall include telegraphing, facsimile transmission or cabling) by the stockholder or by his duly authorized attorney-in-fact, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 10. Notice of Business. At any meeting of stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record entitled to vote at such meeting who complies with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. ARTICLE III DIRECTORS Section 1. Number, Election and Terms of Directors. The business and affairs of the Corporation shall be managed by a Board of Directors which shall consist of not less than nine nor more than fifteen persons, who need not be residents of the State of Delaware or stockholders of the Corporation. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. The directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the first following Annual Meeting of Stockholders, the term of office of the second class to expire at the second following Annual Meeting of Stockholders and the term of office of the third class to expire at the third following Annual Meeting of Stockholders. At each Annual Meeting of Stockholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Stockholders after their election. A directorship to be filled by reason of an increase in the number of directors may be filled (i) by election at an Annual or Special Meeting of Stockholders called for that purpose or (ii) by the Board of Directors for a term of office continuing only until the next election of one or more directors by the stockholders; provided that the Board of Directors may not fill more than two such directorships during the period between any two successive Annual Meetings of Stockholders. Candidates to stand for election as directors at an annual meeting of stockholders shall be nominated by the Board of Directors; and candidates may also be nominated by any stockholder of record entitled to vote at the meeting, provided the stockholder gives timely notice thereof. To be timely, such notice shall be delivered in writing to the Secretary of the Corporation at the principal executive offices of the Corporation not later than 90 days prior to the date of the meeting of stockholders at which directors are to be elected and shall include (i) the name and address of the stockholder who intends to make the nomination, (ii) the name, age and business address of each nominee, and (iii) such other information with respect to each nominee as would be required to be disclosed in a proxy solicitation relating to an election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934. Section 2. Vacancies in the Board of Directors and Removal of Directors. Any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Section 3. General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all powers of the Corporation and do all such lawful acts and things as are not by statute, or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. Section 4. Place of Meetings. The Directors of the Corporation may hold their meetings, both regular and special, either within or without the State of Delaware. Section 5. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held without notice immediately following the annual meeting of stockholders, and at the same place, unless by unanimous consent of the directors then elected and serving such time or place shall be changed. Section 6. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors. Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the President on five days' written notice to each director delivered personally or by mail or telegram. Special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of a majority of the directors. Section 8. Quorum. Unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, the presence of a majority of the number of directors constituting the whole Board shall be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of a majority of the number of Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of directors, the directors present may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Executive Committee. The Board of Directors, by resolution adopted by a majority of the number of directors constituting the whole Board, may designate two or more directors to constitute an Executive Committee, one of whom shall be designated as Chairman. The Executive Committee shall meet monthly or at such times as the Committee may determine to be appropriate. A majority of the Committee shall constitute a quorum and the act of a majority of a quorum shall constitute the act of the Committee. Meetings of the Executive Committee may be called at any time by the Chairman upon three days' notice. During the intervals between the meetings of the Board, the Executive Committee shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, except where action of the Board of Directors is required by law; provided, however, that the Executive Committee shall have no power or authority with reference to (a) amending the Certificate of Incorporation, (b) adopting an agreement of merger or consolidation, (c) recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, (d) recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, (e) amending the Bylaws of the Corporation, (f) declaring a dividend or (g) authorizing the issuance of stock. The Executive Committee shall keep regular minutes of its proceedings and all actions of the Executive Committee shall be reported promptly to the Board. Such actions shall be subject to review by the Board, provided that no rights of third parties shall be affected by such review. Any member of the Executive Committee may be removed, for or without cause, by vote of a majority of the number of directors constituting the whole Board. Section 10. Other Committees. The Board of Directors, by resolution adopted by a majority of the number of directors constituting the whole Board, may designate other committees, each committee to consist of two or more directors and to have and exercise such powers and authority as may be provided in such resolution. Each such committee shall keep regular minutes of its proceedings and make reports to the Board of Directors when and as required by the Board. Section 11. Compensation of Directors. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors or of any committee of the Board of Directors and may be paid a fixed sum for attendance at each such meeting, or may be paid stated salaries as directors, or both; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 13. Meetings by Conference Call, Etc. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 14. Reliance Upon Books. Directors and members of any committee designated by the Board of Directors shall, in the performance of their duties, be fully protected in relying in good faith upon the books of accounts or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation. ARTICLE IV NOTICES Section 1. Form of Notice. Whenever under the provisions of the Certificate of Incorporation, these Bylaws or by statute, notice is required to be given to any director or stockholder, and no provision is made as to how such notice shall be given, it shall not be construed to mean personal notice, but any such notice may be given in writing and personally delivered or sent by mail, postage prepaid, addressed to such director or stockholder at such address as appears on the books of the Corporation, and any such notice required or permitted to be given by mail shall be deemed to be given at the time when the same be thus deposited in the United States mail as aforesaid; such notice may also be given by some form of electronic transmission, in which case it shall be so addressed as to be received by such director or stockholder at the address of such director or stockholder as it appears on the books of the Corporation or at a regular place of such director's or stockholder's business, in which case such notice shall be deemed to be given at the time when the recipient of such transmission acknowledges its receipt. Section 2. Waiver. Whenever any notice is required to be given to any director or stockholder of the Corporation under the provisions of the statutes, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated in such notice, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the attendance is for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE V OFFICERS Section 1. In General. The officers of the Corporation shall be elected by the Board of Directors and shall be a President, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors may also elect additional officers, including but not limited to a Chairman of the Board, a Vice Chairman of the Board, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers, and a Controller. Two or more offices may be held by the same person, except that the office of President and Secretary shall not be held by the same person. Section 2. Election and Removal. The Board of Directors shall elect officers at its first meeting after each annual meeting of the stockholders. The salaries of all officers shall be fixed by the Board of Directors from time to time. Each officer shall hold office until his successor is elected and qualified. Any officer may be removed, for or without cause, at any time by vote of the Board of Directors. Election or appointment of an officer or agent of the Corporation shall not of itself create contract rights. Section 3. Chairman. The Chairman of the Board of Directors, if there be a Chairman, shall preside at all meetings of the stockholders and the Board of Directors. In the absence or disability of the Chairman of the Board, the President shall preside at meetings of the stockholders and the Board of Directors. The Chairman of the Board may be designated by the Board of Directors as the Chief Executive Officer of the Corporation, in which event he shall have the general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chairman of the Board may sign certificates for shares, deeds, mortgages, bonds, contracts and other instruments on behalf of the Corporation, except as otherwise required by law or where the signing thereof is expressly delegated by the Board of Directors or these Bylaws to some other officer or agent. Section 4. President. The President may be designated by the Board of Directors as the Chief Executive Officer of the Corporation, in which event he shall have the general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. If the President is not so designated as the Chief Executive Officer, he shall be the Chief Operating Officer of the Corporation. The President may sign certificates for shares, deeds, mortgages, bonds, contracts and other instruments on behalf of the Corporation, except as otherwise required by law or where the signing thereof is expressly delegated by the Board of Directors or these Bylaws to some other officer or agent. The President shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board, except as otherwise expressly provided in these Bylaws. Section 5. Vice Presidents. If there be an Executive Vice President, he shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. If the President is designated as the Chief Executive Officer of the Corporation pursuant to these Bylaws, the Executive Vice President shall be the Chief Operating Officer of the Corporation. In the absence or disability of the President and the Executive Vice President, the Senior Vice Presidents in the order of their seniority shall perform the duties and exercise the powers of the President. All Vice Presidents of the Corporation shall generally assist the President and the Chairman of the Board and shall perform such other duties as the President or the Chairman of the Board or the Board of Directors may prescribe. Section 6. Secretary. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for the Executive Committee and any other committees of the Board when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President. He shall keep in safe custody the seal of the Corporation. Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as may be prescribed by the Board of Directors or the President. Section 8. Treasurer. The Treasurer shall have the custody of all corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements of the Corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation, and shall perform such other duties as may be prescribed by the Board of Directors or the President. Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as may be prescribed by the Board of Directors or the President. ARTICLE VI CERTIFICATES REPRESENTING SHARES Section 1. Form of Certificates. The Corporation shall deliver certificates representing all shares to which stockholders are entitled. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors and shall be numbered consecutively and entered in the books of the Corporation as they are issued. Each certificate shall state on the face thereof the holder's name, the number, class of shares, and the par value of the shares or a statement that the shares are without par value. They shall be signed by the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be sealed with the seal of the Corporation or a facsimile thereof if the Corporation shall then have a seal. If any certificate is countersigned by a transfer agent or registered by a registrar, either of which is other than the Corporation or an employee of the Corporation, the signatures of the Corporation's officers may be facsimiles. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed on such certificate, shall cease to be such officer, transfer agent or registrar, whether because of death, resignation or otherwise, before such certificate has been delivered by the Corporation or its agents, such certificate may nevertheless be issued and delivered with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 2. Lost Certificates. The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issue of a new certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such form, in such sum, and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 3. Transfer of Shares. Shares of stock of the Corporation shall be transferrable in the manner prescribed by law and in these Bylaws. Shares of stock shall be transferable only on the books of the Corporation by the holder thereof in person or by his duly authorized attorney and, upon surrender to the Corporation or to the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or the transfer agent of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 4. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the outstanding shares of the Corporation may be declared by the Board of Directors at any regular or special meeting, subject to the provisions of law and of the Certificate of Incorporation. Dividends may be declared and paid in cash, in property, or in shares of the Corporation, provided that all such declarations and payments of dividends shall be in strict compliance with all applicable laws and the Certificate of Incorporation. The Board of Directors may fix in advance a record date for the purposes of determining stockholders entitled to receive payment of any dividend, such record date to be not more than 60 days prior to the payment date of such dividend, or the Board of Directors may close the stock ledger for such purpose for a period of not more than 60 days prior to the payment date of such dividend. If the stock transfer books are not closed and no record date is fixed by the Board of Directors, the date upon which the Board of Directors adopts the resolution declaring such dividend shall be the record date. Section 2. Fiscal Year. The fiscal year of the Corporation shall be the twelve-month period ending August 31 of each year unless otherwise fixed by resolution of the Board of Directors. Section 3. Seal. The Corporation shall have a seal and said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. Any officer of the Corporation shall have authority to affix the seal to any document requiring it. Section 4. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contracts or execute and deliver any instruments in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 5. Loans. No loans shall be contracted on behalf of the Corporation, and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. ARTICLE VIII Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than Those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer, of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 3. Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 of this Article VIII shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provision of this Section 4 of this Article VIII shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Section 5. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 of this Article VIII shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. Section 6. Expenses Payable in Advance. Expenses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of any undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to his Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or Section 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII. Section 9. Certain Definitions. For purposes of this Article VIII, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors and officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such indemnification relates to his acts while serving in any of the foregoing capacities, of such constituent corporation, as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VIII. Section 10. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 11. Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 of this Article VIII), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. Section 12. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation. ARTICLE IX AMENDMENTS Section 1. Amendments. These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors at any regular meeting or at any special meeting called for that purpose. Section 2. When Bylaws Silent. It is expressly recognized that when the Bylaws are silent as to the manner of performing any corporate function, the provisions of Delaware law shall control. Section 3. Entire Board of Directors. As used in this Article IX and in these Bylaws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies. EX-10 3 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN [10(J)] AND WELFARE BENEFIT PLAN TRUST [10(K)] Exhibit 10(j) LUBY'S CAFETERIAS, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PREAMBLE The principal objective of this supplemental Executive Retirement Plan (SERP) is to ensure the payment of a competitive level of retirement income in order to attract, retain and motivate selected executives. The plan is designed to provide benefits in excess of the limitations under Section 415 and certain other provisions of the Internal Revenue Code (the "Code"). The effective date of this plan is December 31, 1995. SECTION I DEFINITIONS 1.1 "Accrued Benefit" means a monthly benefit payable as a Life Annuity equal to 50% of Final Average Compensation offset by (1) Primary Social Security, (2) the Annuitized Value of the Profit Sharing Plan and (3) the Annuitized Value of any Deferred Compensation Agreement divided by twelve. The net benefit is prorated by Service less than 25 years. 1.2 "Actuarial Equivalent" means a benefit of equivalent value based on the 1983 Group Annuity Mortality Table (50% Male - 50% Female) and 8.5% annual rate of interest. 1.3 "Affiliate" means any corporation, partnership, joint venture, trust, association or other business enterprise which is a member of a controlled group of corporations or a member of an affiliated service group (as defined in Section 414 of the Code) which includes the Employer. 1.4 "Annuitized Value of Deferred Compensation Agreement" means the Participant's deferred compensation value multiplied by a 10-year installment factor divided by an Actuarial Equivalent life annuity factor. 1.5 "Annuitized Value of Profit Sharing Plan" means the Participant's account balance in the Profit Sharing Plan including cash surrender value at date of termination or Retirement, increased at 8.5% interest to Retirement, divided by an Actuarial Equivalent life annuity factor. 1.6 "Beneficiary" means the person(s) designated by the Participant who is entitled to receive benefits upon the death of the Participant. 1.7 "Board of Directors" means the board of directors, the executive committee or other body given management responsibility for the Employer. 1.8 "Committee" means the Compensation Committee appointed by the Board of Directors of the Employer, which has been given authority by the Board of Directors to administer this Plan. 1.9 "Compensation" means compensation (whether or not payment is deferred) earned by a Participant and shall include the Participant's wages, salaries, fees for professional service and other amounts for personal services actually rendered in the course of employment with an Employer maintaining the Plan (including, but not limited to, commissions paid salespersons, compensation for service on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses). Compensation for this purpose does not include reimbursement for expenses. 1.10 "Contingent Annuitant" means the Participant's spouse designated to receive any payments due after the death of the Participant under the Joint and Survivor Annuity forms of payment. 1.11 "Effective Date" means the effective date of the Plan, December 31, 1995. 1.12 "Employer" means Luby's Cafeterias, Inc. 1.13 "Final Average Compensation" means the average of the last five calendar years of Compensation immediately prior to termination of employment. 1.14 "Joint and Survivor Annuity" means either the Joint and 50% Survivor Annuity or the Joint and 100% Survivor Annuity described in Section III of this Plan. 1.15 "Life Annuity" means an annuity payable for the life of the Participant, with no monthly payments made thereafter. 1.16 "Participant" means an employee of the Employer who is an Officer or Area Vice President who has been named by the Committee as eligible to participate in this Plan. 1.17 "Plan" means Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan. 1.18 "Plan Year" means any twelve month period beginning on September 1st and ending on the last day of August. 1.19 "Primary Social Security" means the actual Social Security Benefit paid to the Participant at initial retirement. 1.20 "Profit Sharing Plan" means the Luby's Cafeterias, Inc. Profit Sharing and Retirement Trust. 1.21 "Rabbi Trust" means the Trust under the Luby's Cafeterias, Inc. Supplemental Executive Retirement Plan which may be established by the Employer to provide itself with a source of funds to assist in the meeting of its liabilities under the Plan. 1.22 "Retirement" means a Participant's actual retirement from the Employer following his or her Normal, Early or Delayed Retirement Date. 1.23 "Service" means a Participant's total completed years and months of employment whether or not continuous. 1.24 "Vesting" means ownership. A Participant's Accrued Benefit becomes 100% vested upon attainment of age 65. There is no vesting prior to age 65 unless approved by the Board of Directors. SECTION II ELIGIBILITY FOR BENEFITS In accordance with the distribution provision contained in Section III of the Plan, each Participant is eligible to receive an Accrued Benefit under this Plan upon attainment of Normal Retirement Date, Delayed Retirement Date or Early Retirement Date (as each is defined in this Section II). 2.2 "Normal Retirement Date" means the December 31 following the date the Participant attains age 65 and completes five years of Service. 2.3 "Early Retirement Date" means, at the discretion of the Board, the first day of the month on or after the Participant attains age 55, or any subsequent month thereafter. 2.4 "Delayed Retirement Date" means the first day of the month on or after the Participant's Normal Retirement Date and retirement from the Employer. SECTION III FORM OF RETIREMENT BENEFIT 3.1 By a Participant's 64th birthday, a Participant shall elect to have his or her Accrued Benefit payable in the normal form of payment, a Life Annuity as defined in Section 1.15, or under one of the optional forms of payment as defined in Sections 3.6 or 3.7. The optional forms of payment defined in Sections 3.4 and 3.5 will not automatically be available to Participants but will be offered at the discretion of the Board of Directors. All optional forms of payment are the Actuarial Equivalent of the Accrued Benefit payable as a Life Annuity. All benefit payments will commence on the first day of the month on or after the date the Participant is eligible to receive payment. If an election is not made at least one year prior to commencement of benefit, a married Participant shall be deemed to have elected a Joint and 50% Survivor Annuity and a Participant who is not married shall be deemed to have elected a Life Annuity. However, Participants who are already at age 64 or older as of the effective date of the Plan will be allowed to make an election as soon as administratively feasible after Plan implementation, but no later than August 1, 1996. 3.2 The monthly benefit payable at an Early Retirement Date will equal the Actuarial Equivalent of the Accrued Benefit determined under Section 1.1 with the Primary Social Security offset delayed until age 62. 3.3 The monthly benefit payable at a Delayed Retirement Date will be equal to the Accrued Benefit determined under Section 1.1 based on the Participant's Delayed Retirement Date. 3.4 "Five Years Certain Annuity" means a modified monthly income payable for a five year period. In the event of the Participant's death within the five year period following the date payments start, the same income will be payable to the Participant's Beneficiary for the remainder of the five year period. 3.5 "Ten Years Certain Annuity" means a modified monthly income payable for a ten year period. In the event of the Participant's death within the ten year period following the date payments start, the same income will be payable to the Participant's Beneficiary for the remainder of the ten year period. 3.6 "Joint and 50% Survivor Annuity" means a modified monthly income payable for the Participant's lifetime. At the Participant's death, 50% of such amount is continue to the Participant's Contingent Annuitant for his or her lifetime. 3.7 "Joint and 100% Survivor Annuity" means a modified monthly income payable for the Participant's lifetime. At the Participant's death, 100% of such amount is continued to the Participant's Contingent Annuitant for his or her lifetime. 3.8 "Small Lump Sum Payment" means a single lump sum payment in lieu of annuity payments. This option will be payable at the discretion of the Board of Directors in cases where the amount of the monthly benefit otherwise payable is less than $100. SECTION IV DEATH BENEFITS 4.1 If a Participant dies before attaining age 55, no death benefit shall be payable under the Plan. 4.2 If a Participant dies after attaining age 55 but prior to his or her Normal Retirement Date, at the discretion of the Board, the Participant's surviving spouse may be paid the 50% survivor benefit that would have been payable if the Participant had retired, elected a Joint and 50% Survivor Annuity, and commenced payments on the first of the month immediately prior to the date of death. If the Participant dies after his or her Normal Retirement Date but before commencement of benefits, the Particpant's surviving spouse will be paid the 50% survivor benefit under the Joint and 50% Survivor Annuity commencing on the first day of the month following the date of the Participant's death. There is no death benefit if the Participant is not married and had not commenced benefit payments at the time of death. 4.3 If a Participant dies after commencement of benefits, the death benefit, if any, is dependent on the form of payment elected. SECTION V ADMINISTRATION 5.1 The Committee will be appointed by the Board of Directors of the Employer. Each Committee member will serve until his or her resignation or removal. The Board of Directors of the Employer will have the sole discretion to remove any one or more Committee members and appoint one or more replacement or additional Committee members from time to time. 5.2 The Committee will select from among its members a chairman who will preside at all of its meetings and will elect a secretary without regard to whether that person is a member of the Committee. The secretary will keep all records, documents and data pertaining to the Committee's supervision and administration of the Plan. A majority of the members of the Committee will constitute a quorum for the transaction of business and the vote of a majority of the members present at any meeting will decide any questions brought before the meeting. In addition, the Committee may decide any question by vote, taken without a meeting, of a majority of its members. A member of the Committee who is also a Participant will not vote or act on any matter relating solely to himself. 5.3 The Committee will have the exclusive responsibility for the general administration of the Plan according to the terms and provisions of the Plan and will have all poers necessary to accomplish those purposes, including but not by way of limitation the right, power and authority: A. to make rules and regulations for the administration of the Plan which are not inconsistent with its terms and provisions; B. to construe all terms, provisions, conditions and limitations of the Plan and its construction of the Plan made in good faith and without discrimination in favor of or against any Participant will be final as to all parties; C. to determine whether a Change In Control has occurred; D. to correct any defect, supply any omission or reconcile any inconsistency that may appear in the Plan in the manner and to the extent it deems expedient to carry the Plan into effect for the greatest benefit of all parties at interest and its judgment in those matters will be final as to all parties; E. to determine all controversies relating to the administration of the Plan, including but limited to: (1) differences of opinion arising between the Employer and a Participant except when the difference of opinion relates to the entitlement to, the amount of, or the method or timing of a benefit affected by a Change in Control, in which event, it shall be decided by judicial action; and (2) any question it deems advisable to determine in order to promote the uniform administration of the Plan for the benefits of all parties at interest; and F. to delegate by written notice those clerical and recordation duties of the Committee, as it deems necessary or advisable for the proper and efficient administration of the Plan. 5.4 The Committee will be reimbursed by the Employer for all expenses properly and actually incurred in the performance of their duties under the Plan. 5.5 The Committee, in exercising any power or authority granted under this Plan or in making any determination under this Plan shall perform or refrain from performing those actions using its sole discretion and judgment. Any decision made by the Committee or any refraining to act or any act taken by the Committee in good faith shall be final and binding on all parties. The Committee's decision shall never be subject to de novo review. Notwithstanding the foregoing, the Committee's decisions, refraining to act, or acting is to be subject to judicial review for those incidents occurring during the Plan Year in which a Change In Control occurs and during the Plan Year following a Change in Control. SECTION VI MISCELLANEOUS 6.1 The Board of Directors may, in its sole discretion, terminate, suspend or amend this Plan at any time or from time to time, in whole or in part. However, no amendment or suspension of the Plan will affect a Participant's right or the right of a Beneficiary to the Accrued Benefit calculated as of the date of termination or amendment unless with the written consent of the Participant or the Beneficiary. Further, no amendment will affect a Participant's rights under any provision relating to a Change In Control after a Change In Control has previously occurred without his or her consent. 6.2 Nothing contained herein will confer upon any Participant the right to be retained in the service of the Employer, nor will it interfere with the right of the Employer to discharge or otherwise deal with Participants without regard to the existence of this Plan, nor shall it give a Participant or any person claiming through him any interest or right under this Plan other than that of any unsecured general creditor of the Employer. 6.3 This Plan is unfunded, and the Employer will make Plan benefit payments solely on a current disbursement basis. However, the Employer may establish a Rabbi Trust to invest assets to be held by an independent trustee. It is also specifically recognized by both the Employer and the Participants that this Plan is only a general corporate commitment and that each Participant must rely upon the general credit of the Employer for the fulfillment of its obligations hereunder. 6.4 To the maximum extent permitted by law, no benefit under this Plan shall be assignable or subject to any manner to alienation, sale, transfer, claims of creditors, pledge, attachment, or encumbrances of any kind. If any Participant, spouse, or Beneficiary becomes bankrupt or attempts to alienate, anticipate, sell, assign, pledge, or encumber any right or benefit under this Plan, that right or benefit will, in the discretion of the Committee, cease. 6.5 The Committee may adopt rules and regulations to assist in the administration of the Plan. 6.6 The Committee will furnish information to the Employer concerning the amount and form of distribution to any Participant entitled to a distribution so that the Employer may make or cause the Rabbi Trust to make the distribution required. It will also calculate the deductions from the amount of the benefit paid under the Plan for any taxes required to be withheld by federal, state, or local government and will cause them to be withheld. 6.7 Should a Participant become incompetent or should a Participant designate a Beneficiary who is a minor or incompetent, the Committee is authorized to pay the funds due to the parent of the minor or to the guardian of the minor or incompetent or directly to the minor or to apply those funds for the benefit of the minor or incompetent in any manner the Committee determines in its sole discretion. 6.8 The Committee will not be liable for any decision or action taken in good faith in connection with the administration of this Plan. Without limiting the generality of the foregoing, any decision or action taken by the Committee when it relies upon information supplied it by any officer of the Employer, the Employer's legal counsel, the Employer's actuary, the Employer's independent accountants or other advisors in connection with the administration of this Plan will be deemed to have been taken in good faith. 6.9 If any term, provision, covenant, or condition of the Plan is held to be invalid, void, or otherwise unenforceable, the rest of the Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated. 6.10 Any notice or filing required or permitted to be given to the Committee or a Participant will be sufficient if in writing and hand delivered or sent by U.S. mail to the principal office of the Employer or to the residential mailing address of the Participant. Notice will be deemed to be given as of the date of hand delivery or if delivery is by mail, as of the date shown on the postmark. 6.11 This Plan is established under and will be construed according to the laws of the State of Texas. 6.12 Vesting in Accrued Benefits In Event of Change In Control or Termination of the Plan. A. Notwithstanding any other provisions of the Plan, in the event of Change in Control (as hereinafter defined) or termination of the Plan, the Accrued Benefit of all actively employed Participants shall become fully vested. B. For purposes of this Section 6.12, a Change In Control shall occur if any one of the four following events occur: (1) any "person," including a "syndication" or "group" as those terms are used in Section 13(d)(3) of the Securities Exchange Act of 1934, is or becomes the beneficial owner, directly or indirectly, or securities of the Employer representing 40% or more of the combined voting power of the Employer's then outstanding voting securities; (2) the Employer is merged or consolidated with another corporation and immediately after giving effect to the merger or consolidation less than 80% of the outstanding voting securities of the surviving or resulting entity are then beneficially owned in the aggregate by (i) the stockholders of the Employer immediately prior to such merger or consolidation, or (ii) if a record date has been set to determine the stockholders of the Employer entitled to vote on such merger or consolidation, the stockholders of the Employer as of such record date; (3) if at any time during a calendar year a majority of the directors of the Employer are not persons who were directors at the beginning of the calendar year (unless the lack of majority is the result of the death of one or more directors); (4) the Employer transfers substantially all of its assets to another corporation which is a less than 80% owned subsidiary of the Employer. C. The provisions of this Section 6.12 may not be amended after the date a Change In Control occurs without the written consent of a majority in number of Participants and Beneficiaries. The Board of Directors reserves the right to amend or eliminate this Section 6.12 prior to the date a Change In Control occurs. D. In the event of a Change In Control, a contribution shall be made to the Rabbi Trust to fully fund the Actuarial Equivalent value of all Accrued Benefits. EXECUTED this 30th day of May, 1996. ATTEST: LUBY'S CAFETERIAS, INC. DEBRA L. WAINSCOTT By: JOHN E. CURTIS, JR. ________________________________ _____________________________ Title: President Exhibit 10(k) LUBY'S CAFETERIAS, INC. WELFARE BENEFIT PLAN TRUST This Agreement made and entered into by and between Luby's Cafeterias, Inc., a corporation, and John E. Curtis, Jr., an individual, as trustee. W I T N E S S E T H: WHEREAS, Luby's Cafeterias, Inc. (hereinafter sometimes referred to as the "Company") has previously adopted an employee welfare benefit plan known as the Luby's Cafeterias, Inc. Welfare Benefit Plan which provides group medical benefits for the exclusive benefit of its eligible employees and the eligible dependents thereof (hereinafter referred to as the "Plan"); and WHEREAS, the Company desires to establish the trust embodied herein and to designate it as a part of the Luby's Cafeterias, Inc. Welfare Benefit Plan, so as to comply with applicable provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"); NOW, THEREFORE, in consideration of the mutual undertakings of each of the parties hereto, the parties hereto agree as follows: ARTICLE I DEFINITIONS As used herein the words and phrases next below set out shall have the meaning next below attributed to them unless the context in which such word or phrase appears reasonably requires a broader, narrower or different meaning. 1.1. "Company" shall mean Luby's Cafeterias, Inc. Welfare Benefit Plan or any successor thereof which shall adopt and continue the Plan and Trust. 1.2. "Contract" or "Contracts" shall mean all insurance contracts in place under the Plan from time to time. 1.3. "Effective Date" shall mean the effective date of this Trust, which date shall be July 18, 1996. 1.4. "Employer" shall mean the Company and any other entity which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) or which is a trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code). 1.5. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.6. "Member" shall mean any individual who meets the eligibility requirements set forth in the Plan, as it may be amended from time to time. 1.7. "Plan" shall mean Luby's Cafeterias, Inc. Welfare Benefit Plan, as amended from time to time, which shall be set forth in a separate Plan document, but is incorporated herein for all purposes. 1.8. "Plan Administrator" shall mean the Company, unless another entity or person is appointed by the Company to administer the Plan pursuant to the terms of the Plan. 1.9. "Trust" or "Trust Fund" shall mean all cash, fixed income investments, money market instruments and other properties actually held by the Trustee pursuant to the provisions of this agreement. 1.10. "Trustee" shall mean the qualified and acting Trustee under this agreement whether it be one or several individuals or a corporate institution or any successor Trustee appointed by the Board of Directors of the Company in accordance with applicable provisions of this Trust agreement. 1.11. "Trust Year" shall mean initially the year beginning on the Effective Date and ending August 31, 1996. Thereafter, the Trust Year shall commence on September 1 and end on the following August 31 of the following calendar year. Unless otherwise provided in the Plan, the Plan year shall correspond with the Trust Year. ARTICLE II ESTABLISHMENT OF TRUST 2.1. A Trust is hereby established by the Company and the Trustee for the sole purpose of creating a fund to provide for the payment of medical, and other related benefits to Members (and their dependents who are eligible to receive benefits under the Plan). ARTICLE III ADOPTION BY EMPLOYERS 3.1. Any business organization which is a member of the Company's controlled group of corporations or is under common control (as defined in Section 1.4 hereof) and which obtains the consent and approval of the Board of Directors of the Company and which by a resolution of its Board of Directors (or equivalent governing authority) elects to participate herein and make contributions hereto shall be deemed to have adopted the Plan and this Trust agreement and agreed to be bound by all the terms, provisions, conditions and limitations of the Plan and this Trust agreement, a copy of which resolution shall be certified and deposited with the Trustee. 3.2. Neither the adoption of this Trust agreement by any such Employer nor any act performed by it in relation to this Trust shall ever create a joint venture or partnership relationship between it and any other Employer. ARTICLE IV CONTRIBUTIONS 4.1. At such time or times and in such manner as shall be determined by the Plan Administrator, each Employer shall contribute in cash to the Trust such sums as it receives from time to time as refunds from any premium stabilization reserves under any Contracts. ARTICLE V DIVISION OF RESPONSIBILITY 5.1. The Trustee shall be a fiduciary with respect to the Trust and except as otherwise provided herein shall have the exclusive responsibility for the Trust Fund and all the powers necessary to receive, hold, preserve, manage, invest and reinvest the Trust Fund as provided generally in this Trust agreement and to pay all costs and expenses incident thereto. The Trustee shall be responsible only for such sums actually received by it as Trustee and shall not be responsible for collecting any contributions from any Employer. 5.2. The Plan Administrator shall be charged with the administration of the Plan and shall decide, subject to the terms of the Plan, all questions pertaining to its administration, interpretation and application. In this regard it is contemplated that the Plan Administrator may delegate portions of its ministerial functions to a third-party administrator provided that any such arrangement shall comply with the applicable provisions of Part 4 of Subtitle B of Title I of ERISA and further provided that the Plan Administrator shall always retain the ultimate control of and the responsibility for the administration of the Plan. The Trustee shall not be responsible for or in any way concerned with the administration of the Plan. 5.3. Any investment manager employed by the Plan Administrator is hereby expressly given the power to direct the Trustee with respect to the management, investment and reinvestment of the Trust Fund. If at any time and from time to time, any such investment manager, as a co-fiduciary, exercises its power (given under the Plan and this Trust) by written notice to the Trustee, to direct the Trustee in the management, investment and reinvestment of the Trust Fund, the Trustee shall be subject to all proper written directions of such investment manager provided that such direction(s) are made in accordance with the terms of this agreement and ERISA. ARTICLE VI THE POWERS, DUTIES AND RESPONSIBILITIES OF THE TRUSTEE 6.1. The Trustee is authorized and empowered to invest or reinvest only in fixed income investments in the form of marketable debt issues with remaining maturities of not more than five years. These would include but not be limited to U.S. government and agency obligations, overnight and term repurchase agreements, bankers acceptances, tax exempt instruments issued by states, municipalities or similar agencies, or Euro dollar certificates of deposit. Specifically precluded are investments in letter stock, short sale contracts, investments in foreign companies not traded on principal exchanges, commodities, foreign currencies and/or equity securities. When investing in money market instruments, those instruments should be rated "A- 1" (as rated by Standard & Poor's) or "P-1" (as rated by Moody's) as defined by recognized rating services or the equivalent for negotiable certificates of deposit of the thirty largest banks in the United States, as measured by assets. Money market fund investments should be invested in one of the following categories: (i) primarily invested in government securities, (ii) P-1 commercial paper or (iii) negotiable certificates of deposits of the thirty largest banks in the United States. Whenever the Trustee receives funds to be invested or determines that assets in the Trust Fund should be sold and the proceeds held for a period of time pending reinvestment or other purpose, such funds may be held uninvested in cash or invested in short term investments such as certificates of deposit with the Trustee, U. S. Treasury bills, savings accounts with the Trustee commercial paper or other similar assets which may be offered by the Trustee and as may be determined by the Trustee in its sole discretion, which assets shall remain a part of the Trust Fund. 6.2. The Trustee shall have the following powers relating to the receipt, preservation, management, investment and reinvestment of both principal and income of this Trust, as it may be composed from time to time in addition to all of the powers granted the Trustee under common law and the laws of the state of the situs of the Trust and all other applicable statutes: (a) To handle, deal with and dispose of the property and estate of the Trust Fund as if it were the simple fee owner of such property and estate; (b) To keep any and all property in the name of some other person, partnership or corporation with a power of attorney for transfer attached, or in its name without disclosing its fiduciary capacity; (c) To collect the principal and income of the Trust Fund as the same may become due and payable and to give binding receipt therefor; (d) To take any action, whether by legal proceeding, compromise, or otherwise, as the Trustee in its sole discretion deems to be in the best interest of the Trust if there is a default in the payment of any principal or income of the Trust at any time; and (e) To invest, sell and reinvest the Trust assets in such assets as it shall select within the permitted limits described in Section 6.1. The Trustee shall not be required to take any legal action to collect, preserve or maintain any Trust property unless it has been indemnified either by the Trust itself, with the approval of the Plan Administrator, or by the Employer with respect to any expenses or losses to which it may be subjected by taking such action. Any property acquired by the Trustee through the enforcement or compromise of any claim or claims it has as Trustee of this Trust will become a part of the Trust Fund. 6.3. The Trustee in discharging its duties with respect to the management, investment and reinvestment of the Trust Fund shall do so solely in the interest of the Members (and their eligible dependents), using the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character; shall diversify the investments of the Trust so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so; and shall otherwise act in accordance with the provisions of this Trust agreement and ERISA. 6.4. The Trustee shall have the following powers relating to payments and distributions to be made from the Trust Fund: (a) Upon direction of the Plan Administrator, to convey, assign and deliver, upon full termination of the Plan and Trust, to such persons as then shall be entitled thereto under the Plan and Trust, the Trust Fund, or the net cash proceeds of the Trust Fund after conversion of non cash assets into cash; (b) To pay out of the Trust Fund the following: amounts due and payable on any advance made by the Trustee or on any loan made by anyone to the Trust Fund, and all taxes of any nature levied, assessed or imposed upon the Trust Fund, reasonable expenses of the Trustee, including counsel fees, and the Trustee's compensation as provided herein; (c) To make distributions out of the Trust Fund only to the person or persons as directed by the Plan Administrator or any agent appointed by the Plan Administrator. If such person or persons cannot be found or the correct distributee cannot be ascertained, to hold such payment or deposit same in a bank, including the Trustee, for the credit of said person or persons without liability for interest thereon. If any check or draft in payment of the benefit hereunder, which has been mailed by regular U.S. mail to the last address of the payee furnished the Trustee by the Plan Administrator is returned unclaimed, the Trustee shall notify the Plan Administrator and shall discontinue further payment efforts until it receives instructions from the Plan Administrator. The Trustee shall not be required to make any investigation to determine the whereabouts or mailing address of any such person or persons. The Trustee may make payment of any benefit hereunder by mailing its check or draft for the amount thereof to the person certified to the Trustee by the Plan Administrator as the person to whom such payment is to be made; and 6.5. All persons dealing with the Trustee are entitled to rely upon the representations of the Trustee as to its authority and are released from any duty to inquire into its authority for taking or omitting any action or to verify that any money paid or other property delivered to the Trustee is used by the Trustee for Trust purposes. Any action of the Trustee under this Trust shall be conclusive evidence of the facts recited in it. All persons shall be fully protected when acting or relying upon any notice, resolution, instruction, direction, order, certificate, opinion, letter, telegram or other document believed by such persons to be genuine, to have been signed by the Trustee, and to be the act of the Trustee. 6.6. The Trustee may engage and consult with legal counsel of its choice, who may be counsel for any Employer or Trustee's own general counsel, with respect to the meaning or construction of the Plan, this Trust agreement or the Trustee's obligations or duties hereunder. 6.7. The Trustee shall not be required to give bond or other security for the faithful performance of its duties unless required by law which cannot be waived; and the Trustee shall not be required to make any inventory, return, or report of any kind to any court unless required by law which cannot be waived. ARTICLE VII NOTICES AND DIRECTIONS 7.1. The Trustee shall not be bound by any certificate, notice, resolution, consent, order, information or other communication unless and until it shall have been received in writing at a location which is mutually agreeable to the parties hereto. 7.2. The Trustee may accept as evidence of the authority of (i) any persons acting as members of the Plan Administrator or (ii) the proper representative(s) of the investment manager, if one is appointed, a copy of a resolution of the Board of Directors of the Company as certified by the Secretary or an Assistant Secretary together with a specimen signature of the Plan Administrator members and/or the proper representative(s) of the investment manager, if one is appointed, and shall be entitled to recognize them as such and act upon the instructions, directions, consents, and requests of the members of the Plan Administrator and/or the proper representative(s) of any appointed investment manager last certified to it. The Trustee may continue to act in accordance with any such notice until the receipt by it of notice rescinding or superseding such action or resolution. 7.3. Instructions, directions or notices of the Plan Administrator to the Trustee, certified to by any one or more members thereof shall be accepted as conclusive evidence of the proper issuance and contents thereof. 7.4. The Trustee, in all matters pertaining to its management, investment and distribution of this Trust, when it acts in good faith, may rely upon any such notice, resolution, instruction, direction, order, certificate, opinion, letter, telegram or other document believed by the Trustee to be genuine, to have been signed by a proper representative of the Plan Administrator (or the investment manager, if one is appointed) and to be the act of the Plan Administrator or the investment manager, as the case may be. It shall accept any certificate or other instrument duly signed by a proper representative of the Plan Administrator or any duly appointed investment manager which purports to evidence an instruction, direction, or order of the Plan Administrator, or the investment manager, as the case may be, as conclusive evidence thereof. 7.5. Notices or communications from the Trustee to the Plan Administrator and/or any duly appointed investment manager shall be addressed to such person or persons as shall have been certified to the Trustee by the Plan Administrator and shall be sent to such person or persons at the principal office of the Company unless the Trustee shall have been instructed in writing to send such communications to another address. ARTICLE VIII TRUSTEE'S FEE AND EXPENSE 8.1. Any corporate Trustee hereunder shall receive fair and reasonable compensation for services rendered in any amount not exceeding the customary and prevailing charges for services of a similar character at the time and at the place such services are performed. No individual Trustee hereunder shall receive compensation for services rendered but, like any corporate Trustee hereunder, shall be reimbursed for expenses properly and actually incurred in the performance of its duties under the Plan and Trust. The Trustee's compensation and the expenses of this Trust shall be paid by the Employer unless an Employer elects to have the Trustee's compensation and the expenses of the Trust paid out of its contribution to the Trust Fund. Each Trust Year each Employer shall bear that portion of such compensation and expense as the amount contributed to the Trust for such year on behalf of Members employed by such Employer bears to the total amount contributed for such year to the Trust on behalf of all Members employed by all participating Employers. ARTICLE IX LIABILITY OF THE TRUSTEE 9.1. The Trustee shall not be liable to the Trust or to any person having a beneficial interest in the Trust for any losses or decline in value which may be incurred upon any investment of the Trust Fund, or for failure of such Fund to produce any or greater earnings, interest, or profits, so long as the Trustee acts in good faith and in accordance with the responsibilities, obligations and duties placed on it under ERISA. 9.2. The Trustee shall not be liable for any act or omission by it because of a direction of an investment manager appointed by the Plan Administrator nor for any act or omission of the Plan Administrator, or an investment manager appointed by the Plan Administrator or any other agent appointed by the Plan Administrator except to the extent required by ERISA, and any other applicable state or federal law, which liability cannot be waived. When the Trustee has made any payment out of the Trust Fund in accordance with the directions of the Plan Administrator or any agent appointed by the Plan Administrator, it shall not be responsible for the correctness of the amount of the payment to the recipient, or the method by which it is paid. The Trustee shall also be protected in relying upon any certificate, notice, resolution, consent, order, or other communication purporting to have been signed on behalf of the Plan Administrator or an investment manager appointed by the Plan Administrator which it believes to be genuine, without any obligation on the part of the Trustee to ascertain whether or not the provisions of the Plan are thereby being complied with. 9.3. The Trustee shall not be liable for any act or omission on its own part except to the extent required by the terms of ERISA, and any other state or federal law applicable, which liability cannot be waived. 9.4. The Trustee may, in its sole discretion withhold from distribution all or any part of the Fund which the Trustee considers necessary and proper for the payment of taxes under present or future laws, which the Trustee is obligated to pay or withhold. 9.5. The Trustee shall not be liable for its failure or inability to file any tax return or other report which it is unable to file because of the failure of the Employer, after written demand by the Trustee, to furnish the information necessary for the preparation thereof. 9.6. If at any time the Trustee is in doubt concerning the course which it should follow in connection with any matter relating to the administration of the Trust, it may request the Plan Administrator to advise it with respect thereto and shall be protected in relying upon any written advice or direction which may be given by the Plan Administrator in response to such request. 9.7. Further, it is specifically provided that upon direction by the Plan Administrator the Trustee may purchase out of the Trust Funds hereof insurance for the Trustee and for the Trust Fund itself to cover liability and losses occurring by reason of the act or omission of the Trustee provided such insurance permits recourse by the insurer against the Trustee in the case of a breach of fiduciary obligation by it. ARTICLE X SETTLEMENT OF THE ACCOUNTS OF THE TRUSTEE 10.1. The Trustee shall keep such records as may be necessary in the conduct of this Trust. The Trustee's books and records of the Trust Fund shall be open to inspection by the Employer and the Plan Administrator at all reasonable times during business hours of the Trustee. 10.2. All income, profits, recoveries, contributions, refunds, and any and all monies, securities and properties of any kind at any time received or held by the Trustee hereunder shall be held for investment purposes as a commingled Trust Fund except as otherwise provided herein. Although separate accounts or records may be maintained for operational and accounting purposes, no such account or record shall be considered as segregating or earmarking any specific assets of the Trust Fund from any other assets of the commingled Trust Fund. 10.3. Within sixty (60) days after the close of each Trust Year and such other times as requested in writing by the Plan Administrator and as of the date of the removal or resignation of the Trustee, the Trustee shall render to the Employer and the Plan Administrator an account and report of the Trust Fund during such Trust Year or covering the period since the previous account and report, whichever is applicable. The report shall reflect the transactions for the period covered and shall reflect the cost of assets and investments, and the fair market value thereof held in the Trust as of the end of the Trust Year or such other date as is applicable. Said report shall be open for inspection for ninety (90) days from date of receipt by the Plan Administrator and Employer and if objections are not filed within that period of time it shall be deemed to have been approved and shall constitute a full and complete discharge and release to the Trustee from the Employer and the Plan Administrator and all persons having or claiming any interest in the Trust Fund. ARTICLE XI ACTION RESIGNATION, REMOVAL AND SUBSTITUTION OF TRUSTEE 11.1. There shall be one (or more) individual(s) who serve(s) as Trustee or one corporate Trustee, as determined from time to time by the Board of Directors of the Company. When more than one individual serves as Trustee, action by the individual trustees shall be determined by the majority of the individual trustees. Such action shall be binding upon all parties at interest. The individuals who collectively act as Trustee may act by vote at a meeting or by writing without a meeting. Any act of the individual or individuals serving as Trustee shall be sufficiently evidenced if certified to by an individual Trustee, and, if there is more than one individual serving as Trustee, one of the individual trustees may be given authority to perform all administrative and ministerial duties. Any individual who serves as Trustee hereunder shall be an employee of an Employer. Each individual Trustee shall serve until a successor Trustee shall be named by the Board of Directors of the Company or until his resignation, death, incapacity or removal, in which event such Board of Directors shall name a successor individual Trustee. An individual Trustee otherwise eligible to participate in the Plan and Trust shall not be excluded on the ground that he is an individual Trustee. 11.2. The Trustee or any successor Trustee may resign as Trustee hereunder at any time by filing with the Company its written resignation. No such resignation shall take effect until sixty (60) days from the date thereof unless prior thereto a successor Trustee shall have been appointed and accepted. 11.3. The Trustee or any successor Trustee may be removed by the Company at any time. No such removal shall take effect until sixty (60) days from the date that the notice in writing was delivered to the Trustee unless prior thereto a successor Trustee shall have been appointed and accepted and the Trustee consents to such earlier date. 11.4. Any vacancy in the office of Trustee created by the resignation or removal of the Trustee shall not terminate the Trust. Upon removal or resignation of the Trustee, the Board of Directors of the Company shall appoint a successor Trustee. 11.5. The appointment of a successor Trustee hereunder shall be accomplished by the delivery to the resigning or removed Trustee, as the case may be, of an instrument in writing by the Company appointing such successor Trustee, and its acceptance in writing of the appointment as successor Trustee hereunder. Any successor Trustee hereunder shall be one or more individuals who are employees of an Employer or a corporation authorized and empowered to conduct a trust business in the state of the sinus of the Trust. All of the provisions set forth herein with respect to the Trustee shall relate to each successor Trustee. 11.6. Any successor Trustee, after acknowledging acceptance of this Trust and accepting the Trust assets and the accounting of the retiring Trustee, shall be vested with all the estates, titles, rights, powers, duties, and discretions granted to the retiring Trustee. The retiring Trustee shall execute and deliver all assignments or other instruments as may be necessary or advisable in the discretion of the successor Trustee. 11.7. Any corporation into which any corporate Trustee or any successor corporate Trustee may be merged or consolidated, or any corporation resulting from any merger or consolidation to which any corporate Trustee or any successor corporate Trustee may be a party, or any corporation to which all or substantially all of the Trust business of any corporate Trustee or any successor corporate Trustee may be transferred, shall be a successor of such Trustee hereunder without the filing of any instrument or the performance of any other act. ARTICLE XII AMENDMENT AND TERMINATION 12.1. Subject to the provisions of Article II, the Board of Directors of the Company shall have the sole right (i) to amend the Plan and (ii) to amend this Trust with the consent of the Trustee. Any amendment shall be made by a certified copy of a resolution of the Board of Directors of the Company setting forth the nature of the amendment and its effective date and, in the event of an amendment of the Trust, a written consent of the Trustee. In the event of an amendment, each other Employer will be deemed to have consented to and adopted the amendment unless an Employer notifies the Plan Administrator and the Trustee to the contrary in writing within thirty (30) days after receipt of a copy of the amendment, in which case the rejection will constitute a withdrawal from the Plan and this Trust by that Employer. 12.2. The Company shall make such amendments to this Trust as may be necessary to maintain compliance with the various federal and state laws and all such amendments may be made retroactively. 12.3. An Employer may withdraw from this Trust either by rejecting an amendment to the Plan or this Trust or by giving written notice of its intent to withdraw to the Company, the Plan Administrator and the Trustee. The Plan Administrator will then determine, within sixty (60) days following the receipt of the rejection or notice, the portion of the Trust Fund that is attributable to the Members employed by the withdrawing Employer and shall forward a copy of the determination to the Trustee. Upon receipt of the determination, the Trustee will immediately segregate those assets attributable to the Members employed by the withdrawing Employer and will transfer those assets to the successor Trustee or Trustees when it receives a designation of such successor from the withdrawing Employer. The determination of the Plan Administrator, in its sole discretion, of the portion of the Trust Fund that is attributable to the Members employed by the withdrawing Employer will be final and binding upon all parties at interest; and, the Trustee's transfer of those assets to the designated successor Trustee shall relieve the Trustee of any further obligation, liability or duty to the withdrawing Employer, the Members employed by that Employer and the successor Trustee or Trustees. 12.4. Any Employer may terminate this Trust with respect to itself by executing and delivering to the Trustee a notice of termination which specifies the date on which the Plan and Trust shall terminate. Likewise, this Trust will automatically terminate with respect to any Employer upon the adjudication of that Employer as a bankrupt, the general assignment by that Employer to or for the benefit of its creditors, or the dissolution of that Employer without a successor. Upon the termination of this Trust by any Employer, the Trustee shall thereupon use and apply the Trust Fund for the payment of all obligations of the Trust which are incurred on behalf of the terminating Employer. Except as otherwise provided herein, remaining funds shall be used and applied by the Trustee, as directed by the Plan Administrator, to provide additional benefits of the kind and type described in Article II hereof to the Members then participating hereunder or for such other similar or related purposes. The termination of this Trust as to any one or more Employers will not constitute a termination of this Trust with respect to the other remaining Employers. 12.5. This Trust will not automatically terminate with respect to an Employer in the event it consolidates, merges, and is not the surviving corporation, sells substantially all of its assets, is a party to a reorganization and its Employees and substantially all of its assets are transferred to another entity, liquidates or dissolves if there is a successor corporation which is a member of the Company's controlled group of corporations, or under common control (as set forth in Section 1.4 herein). Instead, such resulting successor corporation may continue this Trust by adopting a resolution providing for the continuance of the Trust simultaneous with or within one year after such consolidation, merger, sale, reorganization, liquidation or dissolution. If, after the one year period such successor corporation has not adopted this Trust, this Trust will then automatically terminate with respect to such successor corporation on the first day next following the one year period and the Trust will be handled as provided above in Section 12.4. ARTICLE XIII MISCELLANEOUS 13.1. The adoption and maintenance of this Trust shall not be deemed to be a contract between any Employer and its employees which gives any employee the right to be retained in the employment of any Employer; to interfere with the rights of any Employer to discharge any employee at any time; or to interfere with the employee's right to terminate his employment at any time. 13.2. No benefit payable or to become payable from this Trust will be subject: to anticipation or assignment by any Member or other person entitled to receive benefits under the Plan and Trust; to attachment by, interference with, or control of any creditor of a Member or other person entitled to receive benefits under the Plan and Trust; or to being taken or reached by any legal or equitable process in satisfaction of any debt or liability of a Member prior to its actual receipt by such Member. Any attempted conveyance, transfer, assignment, mortgage, pledge, or encumbrance is intended to take place or become effective before or after any distribution of trust assets or the termination of this Trust Fund, itself. And, the Trustee will never under any circumstances be required to recognize any conveyance, transfer, assignment, mortgage, pledge or encumbrance by a Member or other person entitled to receive benefits under the Plan and Trust of the Trust Fund, any part of it, or any interest in it, or to pay any money or thing of value to any creditor or assignee of a Member or other person entitled to receive benefits under the Plan and Trust for any cause whatsoever. 13.3. Whenever the context requires such, words of the masculine gender used herein shall include the feminine and the neuter; and words used in the singular shall include the plural. 13.4. The provisions of this Trust shall be construed, according to the laws of the State of Texas. The Trustee or any Employer may at any time initiate a legal action or proceeding for the settlement of the account of the Trustee, or for the determination of any question or for instructions. The only necessary parties to any such action or proceeding are the Trustee and the Employer concerned; however, any other person or persons may be included as parties defendant at the election of the Trustee and the Employer. 13.5. Each provision of this Trust is severable and if any provision is found to be void or against public policy, it shall not affect the validity of any other provision hereof. IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust agreement to be executed this 18th day of July, 1996. Luby's Cafeterias, Inc. By: JOHN E. CURTIS, JR. ________________________________________ Title: President ______________________________________ ATTEST: SUSAN L. BEGGS _____________________________________________________ Title: Assistant Secretary ______________________________________________ JOHN E. CURTIS, JR. _______________________________________________ John E. Curtis, Jr. TRUSTEE EX-11 4 COMPUTATION OF PER SHARE EARNINGS Exhibit 11 COMPUTATION OF PER SHARE EARNINGS The following is a computation of the weighted average number of shares outstanding which is used in the computation of per share earnings for Luby's Cafeterias, Inc. for the three and twelve months ended August 31, 1996 and 1995. Three months ended August 31, 1996: 24,125,505 x shares outstanding for 30 days $ 723,765,150 24,125,419 x shares outstanding for 31 days 747,887,989 24,072,780 x shares outstanding for 31 days 746,256,180 ______________ 2,217,909,319 Divided by number of days in the period 92 ______________ 24,107,710 Twelve months ended August 31, 1996: 23,313,132 x shares outstanding for 21 days 489,575,772 23,315,089 x shares outstanding for 21 days 489,616,869 23,320,721 x shares outstanding for 18 days 419,772,978 23,331,311 x shares outstanding for 8 days 186,650,488 23,334,503 x shares outstanding for 23 days 536,693,569 23,340,118 x shares outstanding for 11 days 256,741,298 23,345,163 x shares outstanding for 21 days 490,248,423 22,398,704 x shares outstanding for 30 days 701,961,120 23,529,859 x shares outstanding for 13 days 305,888,167 23,590,511 x shares outstanding for 16 days 377,448,176 23,693,381 x shares outstanding for 31 days 734,494,811 23,925,105 x shares outstanding for 30 days 717,753,150 24,043,597 x shares outstanding for 31 days 745,351,507 24,125,505 x shares outstanding for 30 days 723,765,150 24,125,419 x shares outstanding for 31 days 747,887,989 24,072,780 x shares outstanding for 31 days 746,256,180 _______________ 8,670,105,647 Divided by number of days in the period 366 ______________ 23,688,813 Three months ended August 31, 1995: 23,310,232 x shares outstanding for 26 days 606,066,032 23,310,732 x shares outstanding for 38 days 885,807,816 23,311,932 x shares outstanding for 4 days 93,247,728 23,313,132 x shares outstanding for 24 days 559,515,168 ______________ 2,144,636,744 Divided by the number of days in the period 92 ______________ 23,311,269 Twelve months ended August 31, 1995: 25,074,982 x shares outstanding for 18 days 451,349,676 24,941,910 x shares outstanding for 12 days 299,302,920 24,934,917 x shares outstanding for 16 days 398,958,672 24,713,278 x shares outstanding for 15 days 370,699,170 24,520,641 x shares outstanding for 17 days 416,850,897 24,416,386 x shares outstanding for 13 days 317,413,018 24,383,698 x shares outstanding for 14 days 341,371,772 24,270,808 x shares outstanding for 20 days 485,416,160 24,189,103 x shares outstanding for 28 days 677,294,884 23,851,100 x shares outstanding for 28 days 667,830,800 23,660,154 x shares outstanding for 14 days 331,242,156 23,575,659 x shares outstanding for 17 days 400,786,203 23,424,790 x shares outstanding for 12 days 281,097,480 23,310,232 x shares outstanding for 75 days 1,748,267,400 23,310,732 x shares outstanding for 38 days 885,807,816 23,311,932 x shares outstanding for 4 days 93,247,728 23,313,132 x shares outstanding for 24 days 559,515,168 _____________ 8,726,451,920 Divided by the number of days in the period 365 _____________ 23,908,087 EX-21 5 SUBSIDIARIES OF LUBY'S CAFETERIAS, INC. Exhibit 21 SUBSIDIARIES OF LUBY'S CAFETERIAS, INC. L & W Seafood, Inc., a Delaware corporation (owned 80% by Luby's Cafeterias, Inc.) EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 YEAR AUG-31-1996 AUG-31-1996 2,687 0 541 0 4,517 11,358 458,463 146,874 335,290 46,454 0 8,769 0 0 216,904 335,290 450,128 450,128 234,341 234,341 132,595 0 2,130 62,542 23,334 39,208 0 0 0 39,208 1.66 1.66 Other stockholders' equity amount is less cost of treasury stock of $77,415.
EX-99 7 CONSENT Exhibit 99(a) Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-36791) pertaining to the Luby's Cafeterias, Inc. Management Incentive Stock Plan and (Form S-8 No. 33-10559) pertaining to the Luby's Cafeterias, Inc. Performance Unit Plan of our report dated October 1, 1996, with respect to the financial statements of Luby's Cafeterias, Inc. incorporated by reference in the Annual Report (Form 10-K) for the year ended August 31, 1996. ERNST & YOUNG LLP San Antonio, Texas November 25, 1996 -----END PRIVACY-ENHANCED MESSAGE-----