10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003 or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                          to                                          .

* Commission file number 000-22150

LANDRY’S RESTAURANTS, INC.

(Exact Name of the Registrant as Specified in Its Charter)

DELAWARE	76-0405386
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
1510 WEST LOOP SOUTH
HOUSTON, TX 77027	77027
(Address of Principal Executive Offices)	(Zip Code)

(713) 850-1010

(Registrant’s Telephone Number, Including Area Code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

Common Stock, par value $.01 per Share

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 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 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. Yes x            No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x            No ¨

State the aggregate market value of the voting Common Stock held by non-affiliates computed by reference to the price at which the Common Stock was last sold as of the last business day of the registrant’s most recent completed second fiscal quarter, June 30, 2003. $536,300,000. For this purpose, all shares held by officers and directors of the registrant are considered to be held by affiliates, but neither the registrant nor such persons concede that they are affiliates of the registrant.

The number of shares outstanding of the registrant’s common stock is 27,721,252 as of February 25, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

The Proxy Statement for the Registrant’s 2004 Annual Meeting of Stockholders, to be filed pursuant to regulation 14A under the Securities Exchange Act of 1934, as amended, is incorporated by reference into Part III of this Form 10-K. Although such Proxy Statement is not currently available, it will be filed with the Securities and Exchange Commission within 120 days after December 31, 2003.

LANDRY’S RESTAURANTS, INC.

TABLE OF CONTENTS

		Page No.
PART I.
Item 1.	Business	3
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
PART II.
Item 5.	Market For the Registrant’s Common Stock and Related Stockholder Matters	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	26
Item 9A.	Controls and Procedures	27
PART III.
Item 10.	Directors and Executive Officers of the Registrant	28
Item 11.	Executive Compensation	28
Item 12.	Security Ownership of Certain Beneficial Owners and Management	28
Item 13.	Certain Relationships and Related Transactions	30
Item 14.	Principal Accountant Fees and Services	31
PART IV.
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	31
SIGNATURES		52
EXHIBIT INDEX		53
EXHIBITS		55

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FORWARD LOOKING STATEMENTS

In this report, we have made forward-looking statements. Our forward-looking statements are subject to risks and uncertainty, including without limitation, our ability to continue our expansion strategy, our ability to make projected capital expenditures, as well as general market conditions, competition, and pricing. Forward-looking statements include statements regarding:

• future capital expenditures (including the amount and nature thereof);

• business strategy and measures to implement that strategy;

• competitive strengths;

• goals;

• expansion and growth of our business and operations;

• future commodity prices;

• availability of food products, materials and employees;

• consumer perceptions of food safety;

• changes in local, regional and national economic conditions;

• the effectiveness of our marketing efforts;

• changing demographics surrounding our restaurants;

• the effect of tax laws, and any changes therein;

• same store sales;

• earnings guidance;

• the seasonality of our business;

• weather acts of God;

• food, labor, fuel and utilities costs;

• plans;

• references to future success as well as other statements which include words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and

• other similar expressions.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, we cannot assure you that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

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LANDRY’S RESTAURANTS, INC.

PART I

ITEM 1.    BUSINESS

General

We are principally engaged in the ownership and operation of full-service, casual dining restaurants, primarily under the names of Joe’s Crab Shack, Landry’s Seafood House, The Crab House, Charley’s Crab, The Chart House, Saltgrass Steak House and Rainforest Cafe. As of December 31, 2003, we were the second largest full-service seafood restaurant chain in the United States, and operated 286 full-service restaurants. The ongoing unit count on December 31, 2003, consisted of 138 Joe’s Crab Shack restaurants, 41 Landry’s Seafood House division restaurants, 26 Chart House restaurants, 29 Saltgrass Steak House division restaurants, 26 Rainforest Cafe restaurants, 15 Charley’s Crab restaurants, 11 Crab House restaurants, and a small number of limited menu restaurants.

We opened the first Landry’s Seafood House restaurant in 1980. In 1993, we became a publicly held company. Our stock is listed on the New York Stock Exchange under the symbol “LNY.” In 1994, we acquired the first Joe’s Crab Shack restaurant and in 1996, acquired the Crab House chain of restaurants. We acquired Rainforest Cafe, Inc., a publicly traded restaurant company in 2000. During 2001, we changed our name to Landry’s Restaurants, Inc. to reflect our expansion and broadening of operations. During 2002, we acquired 15 Charley’s Crab seafood restaurants located primarily in Michigan and Florida, and 27 Chart House seafood restaurants, located primarily on the East and West coasts of the United States. Both of these acquisitions included plans for the redevelopment of an additional 10 acquired lower profitability restaurants into Joe’s Crab Shack restaurants, and the sale or disposal of certain non-strategic locations. In October 2002, we purchased 27 Texas-based Saltgrass Steak House restaurants.

We will continue to add to our base of restaurants, opening primarily Joe’s Crab Shack and Saltgrass Steak House restaurants. The majority of our new restaurant expansion will be in areas where we are already located so we can take advantage of advertising and other economies of scale, including our existing labor force.

Our Principal office is located at 1510 West Loop South, Houston, Texas 77027, and our telephone number is (713) 850-1010. Our website address is www.landrysrestaurants.com.

We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Information on our website is not a part of this report.

Core Restaurant Concepts

Joe’s Crab Shack.    Joe’s Crab Shack, a full-service seafood restaurant featuring a varied seafood menu and offering many varieties of crab specialties, represents our primary growth vehicle. The atmosphere of a Joe’s Crab Shack has an energetic casual feel, with a fun, eclectic decor influenced by a weathered, old beach front fish shack. Many of our Joe’s Crab Shack facilities incorporate a small playground area for children adjacent to family dining areas. Dinner entree prices range from $8.99 to $15.99, with certain crab items available at market price. Lunch entree prices range from $5.99 to $8.99. During the year ended December 31, 2003, alcoholic beverage sales accounted for approximately 15% of the concept’s total restaurant revenues.

Landry’s Division.    Landry’s Seafood House is a full-service traditional Gulf Coast seafood restaurant and was the original growth strategy, although in recent years the growth has been focused and concentrated on the Joe’s Crab Shack restaurants and acquisitions. It offers an extensive menu featuring fresh fish, shrimp, crab, lobster, scallops, other seafood, beef and chicken specialties in a comfortable, casual atmosphere. The restaurants

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feature a prototype look that is readily identified by a large theater-style marquee over the entrance and by a distinctive brick and wood facade, creating the feeling of a traditional old seafood house restaurant. Dinner entree prices range from $13.99 to $29.99, with certain items offered at market price. Lunch entrees range from $7.99 to $11.99. During the year ended December 31, 2003, alcoholic beverage sales accounted for approximately 17% of the concept’s total restaurant revenues. In addition to Landry’s Seafood House, the Landry’s Division also includes several distinct concepts such as Grotto, Pesce, Vic & Anthony’s Steakhouse, Willie G’s Seafood and Steak House, La Griglia, and The Flying Dutchman. Each of these concepts offers an upscale dining experience in a unique and memorable setting.

Rainforest Cafe.    The Rainforest Cafe restaurants provide full-service casual dining in a visually and audibly stimulating and entertaining rainforest environment that appeals to a broad range of customers. Each Rainforest Cafe consists of a restaurant and a retail village. The restaurant provides an attractive value to customers by offering a full menu of high quality food and beverage items served in a simulated rainforest complete with thunderstorms, waterfalls and an active wildlife. In the retail village, Rainforest Cafe sells complementary apparel, toys, and gifts with the Rainforest Cafe logo in addition to other items reflecting the rainforest theme. Entrée prices range from $8.99 to $19.99. During the year ended December 31, 2003, retail sales and alcoholic beverage sales accounted for approximately 23% of the concept’s total restaurant revenues. Rainforest Cafe restaurants typically are larger units and generate higher unit volumes than the typical restaurant, although their operating margins and operating cost margin percentages are quite similar to the Company’s other restaurants. We are growing this division more slowly than the other growth concepts.

The Crab House.    The Crab House is a full-service casual dining seafood restaurant with a casual nautical theme. Many of The Crab House restaurants feature a fresh seafood salad bar. Dinner entree prices range from $13.99 to $18.99, with certain items offered at market price. Lunch entrees range from $6.99 to $9.99. During the year ended December 31, 2003, alcoholic beverage sales accounted for approximately 14% of the concept’s total restaurant revenues.

Chart House and C.A. Muer.    The Chart House and C.A. Muer (trade name Charley’s Crab) restaurants have very long and successful operating histories and provide an upscale full-service dining experience. Located on some of the most scenic properties on the East and West coasts, many Chart House restaurants, which were founded in 1961, sit on prime water-front venues. Charley’s Crab restaurants, which were founded in 1964, are generally situated throughout Michigan and Florida, include numerous waterfront locations and have unique architectural details with two restaurants located in renovated historical train stations. Both restaurant menus offer an extensive variety of seasonal fresh fish, shrimp, beef and other daily seafood specialties, and several restaurants also offer lunch seating and a Sunday brunch. Chart House dinner entree prices range from $18.99 to $30.99 with lunch entree prices ranging from $8.99 to $14.99. Charley’s Crab dinner entree prices range from $18.99 to $32.99 with lunch entree prices ranging from $8.99 to $16.99. During the year ending December 31, 2003, alcoholic beverage sales accounted for approximately 22% of the Chart House restaurant revenues and 21% of the C.A. Muer total restaurant revenues.

Saltgrass Steak House.    Saltgrass Steak House, acquired in 2002 for the purpose of additional growth complementary to Joe’s Crab Shack, offers full-service casual dining in a Texas-Western theme. Prototype buildings welcome guests into a stone and wood beam ranch house complete with a fireplace and a saloon-style bar. Customers are presented with a host of menu options ranging from filet mignon to chicken fried steak to fresh fish to grilled chicken breast. Dinner entree prices range from $9.99 to $25.99 and lunch prices range from $6.99 to $14.99. During the year ended December 31, 2003, alcoholic beverage sales accounted for approximately 12% of the concept’s total restaurant revenues.

Specialty Growth Division.    The opening of our Company owned Kemah Boardwalk in 1999, with its multiple attractions including specialty retail shops, boutique hotel, carnival-style rides and games, and other attractions combined with several of our restaurants introduced a new growth vehicle for our Company, the Specialty Growth Division. This division provides us the opportunity to expand our realm of business into areas

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that are closely related to our core restaurant business. This expansion is in addition and complementary to the growth of our core concepts and potential future acquisitions and includes the following projects:

• Kemah Boardwalk and the Aquarium—Galveston, Texas.    The Kemah Boardwalk entertainment complex sits on approximately 40-acres in the Galveston, Texas area and features seven of our restaurants, retail shops, a hotel, amusement rides and a marina and is the home of our initial landmark aquarium themed restaurant named The Aquarium—An Underwater Dining Adventure. The Aquarium restaurant concept offers seafood dining in an extraordinary setting. Guests are seated around a large centerpiece aquarium and numerous smaller aquariums with decor and lighting that complement the overall dining experience and dine amongst fish and coral with the illusion of being at the bottom of the sea.

• Downtown Aquarium—Houston, Texas.    Guests of the Downtown Aquarium in Houston, Texas, which opened in February 2003, dine in the Aquarium—An Underwater Dining Adventure restaurant. The Downtown Aquarium also features a public aquarium complex with over 200 species, a giant acrylic shark tank, dancing water fountains, a mini-amusement park and a bar/lounge. In the future, we expect to open an IMAX theater and additional exhibits.

• Rainforest Cafe—Galveston, Texas.    A new Rainforest Cafe opened in Galveston, Texas in January 2003. It boasts a dramatic display of sounds, lights, fire and lava as its active volcano facade erupts at dusk and continues every half-hour thereafter. An outdoor plaza includes a variety of midway games as well as retail and beverage kiosks. The Rainforest River Adventure Ride gives guests an opportunity for an entertaining trip to the rainforests of the world aboard a six-person river raft. Resident parrots and other tropical birds are featured daily as our expert curators encourage interaction with guests and share their knowledge about these exotic creatures.

• Downtown Aquarium—Denver, Colorado.    In 2003, we acquired Ocean Journey, a 12-acre, aquarium complex located adjacent to downtown Denver, Colorado. This world-class facility, home to over 500 species, was built by a non-profit organization in 1999 at a cost of $93 million. Landry’s purchased this ongoing aquarium enterprise in federal bankruptcy proceedings for $13.6 million with no outstanding debt or obligations. Upon assumption of ownership, Landry’s reduced the complex’s workforce, keeping personnel necessary for on-going operations and significantly reducing the corporate overhead. Plans are underway to add an up-scale Aquarium restaurant and family amusements, which will transform the aquarium into a recreational destination, adding a second Downtown Aquarium to the Specialty Growth Division. We expect the redevelopment to be completed in 2005 or 2006, pending the resolution of discussions with the City of Denver and certain taxing jurisdictions.

• Galveston Island Convention Center.    The revitalization of the Galveston seawall on the Gulf of Mexico, an area that includes a significant number of our restaurants, is underway with the new Galveston Island Convention Center scheduled to open in 2004. The convention center will be housed on a 26-acre beachfront locale. The facility will accommodate a 43,000 square foot exhibition hall, a 15,500 square foot ballroom and over 12,000 square feet of smaller breakout rooms. The convention center will be owned by the City of Galveston and will be managed and operated by the Company.

• Holiday Inn on the Beach—Galveston, Texas.    In March 2003, we acquired this 180 room beachfront resort hotel located along Galveston’s seawall and near the new Galveston Island Convention Center under construction.

• Inn at the Ballpark—Houston, Texas.    The Inn at the Ballpark is located in downtown Houston directly across the street from Minute Maid Park, home of the Houston Astros baseball team. This new luxury hotel has over 200 rooms and opened in early 2004, in time for Houston’s 2004 NFL Super Bowl and Major League Baseball’s 2004 All-Star game. The hotel will offer visitors to Houston easy access to all of downtown Houston’s amenities including the newly expanded George R. Brown Convention Center, the new Toyota Center, home of the Houston Rockets basketball team, the Theater District, Minute Maid Professional Baseball Park, and our own Downtown Aquarium.

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• Flagship Inn and Pleasure Pier—Galveston, Texas.    In 2003, we purchased the Galveston Flagship Hotel from the City of Galveston for $500,000, subject to an existing lease. As part of the purchase agreement, upon expiration of the existing lease, the Company has committed to future expenditures of at least $15 million to transform the hotel into an 1800’s-style inn located on a pier overlooking Galveston Bay and the Gulf of Mexico. The surrounding pier is expected to provide an assortment of entertainment and boardwalk games including a roller coaster, ferris wheel and lighthouse reminiscent of an earlier historical leisure time period.

Strategy

Our objective is to develop and operate a nationwide system of restaurants that offers customers a fun dining experience, creates a loyal customer base that generates a high level of repeat business and provides superior returns to our investors. By focusing on the food, value, service, and ambiance of a restaurant, we strive to create an environment that fosters repeat patronage and encourages word-of-mouth recommendations. Our operating strategy focuses on the following:

• Commitment to providing attractive price-value relationship.    Our restaurants provide customers an attractive price-value relationship by serving generous portions with fresh ingredients in high quality meals at moderate prices.

• Commitment to customer satisfaction.    We provide our customers prompt, friendly and efficient service, keeping table-to-wait staff ratios low, and staffing each restaurant with an experienced management team to ensure attentive customer service and consistent food quality.

• Distinctive design and decor and casual atmosphere.    Our restaurant concepts generally have a distinctive appearance and a flexible design, which can accommodate a wide variety of available sites. We strive to create a memorable dining experience for customers to ensure repeat and frequent patronage.

• High profile locations for restaurants.    We locate a substantial number of our restaurants in markets that provide a balanced mix of tourist, convention, business, and residential clientele. We believe that this strategy results in a high volume of new and repeat customers and provides us with increased name recognition in new markets. As of December 31, 2003, we had 85 restaurants that are considered waterfront properties, which we believe is the largest collection of waterfront restaurants of any domestic restaurant company.

• Commitment to attracting and retaining quality employees.    We believe there is a high correlation between the quality of restaurant management and its long-term success. We provide extensive training and attractive compensation as well as promote internally to foster a strong corporate culture and encourage a sense of personal commitment from our employees. With our cash bonus program, our managers typically earn bonuses equal to 15% to 25% of their total cash compensation. We believe we have demonstrated the viability of our restaurant concepts in a wide variety of markets across the U.S. We intend to continue our expansion program through internal growth and acquisitions.

• Expansion of our core restaurant concepts.    We anticipate continued expansion of our core restaurant concepts by opening additional units in existing markets that provide us economic and operating efficiencies and the ability to leverage our operating expertise and knowledge. We intend to concentrate on development of the casual dining segment by building Joe’s Crab Shack and Saltgrass Steak House restaurants in existing markets to increase our competitive position and obtain greater marketing and operational efficiencies. The specific rate at which we are able to open new restaurants will be determined by our success in locating satisfactory sites, negotiating acceptable lease or purchase terms and securing appropriate local governmental permits and approvals, and by our ability to supervise construction and recruit and train management personnel, and achieve or exceed targeted financial results and returns.

• Development of Signature Restaurant Division.    In 2003, we also expanded our presence in the fine dining segment with the addition of several unique and upscale openings. We opened to rave reviews Vic & Anthony’s Steak House and Brenner’s Steak House, both upscale steakhouse restaurants, in Houston,

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Texas. We also acquired several well-known Houston restaurants during 2003, including Pesce, La Griglia, and Grotto. In the future, we will continue to add to our collection of signature restaurants through both internal development of these and other concepts and opportunistic acquisitions.

• Development of Specialty Growth Division.    The Specialty Growth Division works to develop multi-purpose venues offering themed restaurants, amusements, shops, convention centers and/or resort/convention hotel facilities and operations. These attractions are situated in strategic locations and offer an array of dining and entertainment options that appeal to a wide range of tastes and budgets. In 2003, the Downtown Aquarium in Houston, Texas and the Rainforest Cafe in Galveston, Texas were opened. The Inn at the Ballpark, a 200-room luxury hotel located next to Minute Maid Professional Baseball Park in downtown Houston opened in January 2004, and a city funded convention center in Galveston, Texas is currently under construction. The Specialty Growth Division will also be working to develop the recently acquired Ocean Journey into the Downtown Aquarium—Denver, a first-class tourist and entertainment destination adjacent to downtown Denver, Colorado.

• Pursuit of growth through acquisitions.    Acquisitions have contributed significantly to our growth and will continue to play a substantial role in our growth strategy. We have a history of acquisitions, including Joe’s Crab Shack in 1994, the Crab House in 1996, Rainforest Cafe in 2000, and C.A. Muer, Chart House and Saltgrass Steak House restaurants in 2002. We will continue to pursue opportunistic purchases of, or investments in, other restaurant companies and in the hospitality, amusements, entertainment, food service, facilities management or other related industries.

Recent and Planned Growth

We anticipate continued expansion of our core restaurant concepts by opening units in existing and other desirable markets, which provides us economic and operating efficiencies and the ability to leverage our operating expertise. During 2003, we opened 27 new units. In addition, we may pursue opportunistic purchases of other restaurant companies and investments in the hospitality, entertainment, food service, facilities management or other industries.

The following is an update on our recent acquisitions:

Rainforest Cafe (2000).    Our integration efforts produced additional margin expansion in 2003, but most importantly, we were able to stem the tide of previous prolonged revenue declines in retail sales. In fact, overall sales trends at tourist venue units were dramatically better, resulting in positive comparative sales for the year.

Chart House/Muer (2002).    The Chart House and Muer acquisitions provided us the opportunity to purchase a collection of valuable restaurant locations, many of which are situated on premium waterfront properties on the Pacific and Atlantic Oceans. We have begun the process of remodeling many of these units, freshening and updating the look of these venues. In addition, these restaurants are undergoing menu evaluation and re-engineering as we look to feature successful dishes from previous menus side-by-side with bold, fresh ideas from our culinary experts. All of the remodeling and menu changes have been met with favorable results as both of these concepts posted positive comparable sales for 2003. Certain low performing locations were redeveloped into Joe’s Crab Shack restaurants or were closed or sold. No near term expansion of these concepts is currently planned, and future growth will be dependent upon profitability, growth and unit economics.

Saltgrass Steak House (2002).    The nearly seamless integration of Saltgrass into our systems in late 2002 was highlighted by the conversion of all 27 restaurants to our financial tools within 60 days of acquisition. These tools include the point-of-sale system and also implementation of our profitability and labor/payroll programs. Saltgrass’ expansion has already begun with the opening of two new steak houses in 2003. Further expansion into our existing markets and development of new markets is planned for 2004 and beyond.

A designated team of our employees is responsible for opening new restaurant locations, including kitchen personnel and other individuals who are trained as hosts, waiters, floor managers and bartenders. Our enhanced

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management-training program allows assistant general managers to be promoted to general managers. We believe that this program and other factors minimize our turnover at the general manager level. We believe that through our training program and the hiring of outside personnel, we will be able to support our expansion strategy.

Our primary growth vehicle is the Joe’s Crab Shack concept, although additional restaurants in our other concepts will also be built. We believe that the increased consumption of seafood due to its taste, variety and other perceived health advantages supports the decision to continue the opening of seafood restaurants.

Our secondary growth vehicle is Saltgrass Steak House. The unit economics of our restaurants and clustered growth strategy support our decision to concentrate our expansion efforts on quality restaurants in strategically targeted markets.

Additional growth will be achieved through our Specialty Growth Division and possibly by future acquisitions, as we continue to offer a greater diversity of entertainment choices that complement our core restaurant business.

Restaurant Locations

Our restaurants generally range in size from 5,000 square feet to 16,000 square feet, with an average restaurant size of approximately 8,000 square feet. The seafood restaurants generally have dining room floor seating for approximately 215 customers and additional patio seating on a seasonal basis. Saltgrass restaurants seat approximately 260 guests on average. Both formats offer bar seating for approximately 10 to 20 additional customers.

The Rainforest Cafe restaurants are larger, generally ranging in size from approximately 15,000 to 30,000 square feet with an average restaurant size of approximately 20,000 square feet. The Rainforest Cafe restaurants have between 300 and 600 restaurant seats with an average of approximately 400 seats.

The following table enumerates by state the location of our restaurants as of December 31, 2003:

State	Number of Units	State	Number of Units
Alabama	3	Mississippi	1
Arizona	5	Missouri	4
California	27	Nevada	6
Colorado	8	New Jersey	5
Connecticut	1	New Mexico	1
Delaware	1	New York	1
Florida	30	North Carolina	3
Georgia	9	Ohio	9
Idaho	1	Oklahoma	4
Illinois	10	Oregon	1
Indiana	5	Pennsylvania	3
Kansas	2	South Carolina	8
Kentucky	3	Tennessee	6
Louisiana	4	Texas	93
Maryland	3	Utah	2
Massachusetts	2	Virginia	7
Michigan	12	Washington	2
Minnesota	3	Toronto, Canada	1
		Total	286

We are also the developer and operator of the Kemah Boardwalk located south of Houston, Texas. We own and operate substantially all of the 40-acre Kemah Boardwalk development, which includes seven restaurants (included in the table above), a hotel, retail shops, amusement attractions, and a marina.

We own and operate several additional limited menu restaurants and other properties which are excluded from the numerical counts due to lack of materiality.

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Menu

Our seafood restaurants offer a wide variety of high quality, broiled, grilled, and fried seafood items at moderate prices, including red snapper, shrimp, crawfish, crab, lump crabmeat, lobster, oysters, scallops, flounder, and many other traditional seafood items, many with a choice of unique seasonings, stuffings and toppings. Menus include a wide variety of seafood appetizers, salads, soups and side dishes. We provide high quality beef, fowl, pastas, and other American food entrees as alternatives to seafood items. Our restaurants also feature a unique selection of desserts often made fresh on a daily basis at each location. Many of our restaurants offer complimentary salad with each entree, as well as certain lunch specials and popularly priced children’s entrees. The Rainforest Cafe menu offers traditional American fare, including beef, chicken and seafood. Saltgrass Steak House offers a variety of Certified Angus Beef, prime rib, pork ribs, fresh seafood, chicken and other Texas cuisine favorites at moderate prices.

Management and Employees

We staff our restaurants with management that has experience in the restaurant industry. We believe our strong team-oriented culture helps us attract highly motivated employees who provide customers with a superior level of service. We train our kitchen employees and wait staff to take great pride in preparing and serving food in accordance with our high standards. Restaurant managers and staff are trained to be courteous and attentive to customer needs, and the managers, in particular, are instructed to visit each table. Senior corporate management hosts weekly meetings with restaurant general managers to discuss individual restaurant performance and customer comments. Moreover, we require general managers to hold weekly staff meetings at their individual restaurants. We monitor compliance with our quality requirements through periodic on-site visits and formal periodic inspections by regional field managers and supervisory personnel from our corporate offices.

Our typical seafood unit has a general manager and several kitchen and floor managers. We have internally promoted many of the general managers after training them in all areas of restaurant management with a strong emphasis on kitchen operations. The general managers generally spend a portion of their time in the dining area of the restaurant, supervising the staff and providing service to customers.

The Rainforest Cafe unit management structure is more complex due generally to higher unit level sales, larger facilities, more sophisticated rainforest theming, including animatronics, aquariums, and complementary retail business activity. A management team consisting of floor, kitchen, retail, facility and outside sales managers supports the general manager.

Each restaurant management team is eligible to receive monthly incentive bonuses. These employees typically earn between 15% and 25% of their total cash compensation under this program.

We have spent considerable effort in developing employee growth programs whereby a large number of promotions occur internally. We require each trainee to participate in a formal training program that utilizes departmental training manuals, examinations and a scheduled evaluation process. We require newly hired wait staff to spend from five to ten days in training before they serve our customers. We utilize a program of background checks for prospective management employees, such as criminal checks, credit checks, driving record and drug screening. Management training encompasses three general areas:

• all service positions;

• management, accounting, personnel management, and dining room and bar operations; and

• kitchen management, which entails food preparation and quality controls, cost controls, training, ordering and receiving and sanitation operations.

Due to our enhanced training program, management training customarily lasts approximately 8 to 12 weeks, depending upon the trainee’s prior experience and performance relative to our objectives. As we expand, we will need to hire additional management personnel, and our continued success will depend in large part on our ability

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to attract, train, and retain quality management employees. As a result of the enhanced training programs, we attract and retain a greater proportion of management personnel through our existing base of employees and internal promotions and advancements.

As of December 31, 2003, there were approximately 75 individuals involved in regional management functions generally performing on-site visits, formal inspections and similar responsibilities. As we grow, we plan to increase the number of regional managers, and to have each regional manager responsible for a limited number of restaurants within their geographic area. We plan to promote successful experienced restaurant level management personnel to serve as future regional managers. Regional management is continuously evaluated for performance and effectiveness.

As of December 31, 2003, we employed approximately 25,000 persons, of whom 1,701 were restaurant managers or manager-trainees, 493 were salaried corporate and administrative employees, approximately 75 were operations regional management employees, 84 were development and construction employees and the rest were hourly employees (all numbers approximate). Typical restaurant employment for us is at a seasonal low at December 31, 2003, and may increase seasonally by 30% or more in the summer months. Our restaurants generally employ an average of approximately 60 to 100 people, depending on seasonal needs. The larger Rainforest Cafe restaurants generally have 160 to 200 employees on average, with certain larger volume units having in excess of 400 people on staff. We believe that our management level employee turnover for 2003 was within industry standards. None of our employees are covered by a collective bargaining agreement. We consider our relationship with employees to be satisfactory.

Customer Satisfaction

We provide our customers prompt, friendly and efficient service by keeping table-to-wait staff ratios low and staffing each restaurant with an experienced management team to ensure attentive customer service and consistently high food quality. Through the use of comment cards, a toll-free telephone number, and a web-based customer response site, senior management receives valuable feedback from customers and demonstrates a continuing interest in customer satisfaction by responding promptly.

Purchasing

We strive to obtain consistent, quality items at competitive prices from reliable sources. We continually search for and test various product sizes, species, and origins, in order to serve the highest quality products possible and to be responsive to changing customer tastes. In order to maximize operating efficiencies and to provide the freshest ingredients for our food products, while obtaining the lowest possible prices for the required quality, each restaurant’s management team determines the daily quantities of food items needed and orders such quantities from our primary distributors and major suppliers at prices negotiated primarily by our corporate office. We emphasize availability of the items on our menu, and if an item is in short supply, restaurant level management is expected to procure the item immediately.

We use many suppliers and obtain our seafood products from global sources in order to ensure a consistent supply of high-quality food and supplies at competitive prices. While the supply of certain seafood species is volatile, we believe that we have the ability to identify alternative seafood products and to adjust our menus as required. We routinely inventory bulk purchases of seafood products and retail goods for distribution to our restaurants to take advantage of buying opportunities, leverage our buying power, and hedge against price and supply fluctuations. As we continue to grow, our ability to improve our purchasing and distribution efficiencies will be enhanced.

We believe that our essential food products and retail goods are available, or can be made available upon relatively short notice, from alternative qualified suppliers and distributors. We primarily use two national distributors in order to achieve certain cost efficiencies, although such services are available from alternative

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qualified distributors. We have not experienced any significant delays in receiving our food and beverage products, restaurant supplies or equipment. We are reviewing and analyzing alternative distribution companies and strategies.

Advertising and Marketing

We employ a marketing strategy to attract new customers, to increase the frequency of visits by existing customers, and to establish a high level of name recognition. We have historically relied primarily on word-of-mouth publicity, billboards with distinctive graphics, travel and hospitality magazines and print advertising. Since 1999, we successfully expanded our use of television and radio commercials. We use multiple billboards on highways to direct potential customers from the highways to the restaurants, as well as to build name recognition within each market. Our advertising expenditures for 2003 were approximately 3.0% of revenues. We anticipate that future advertising and marketing expenses will moderate as a percentage of revenues, and that we may utilize moderate television and radio advertising.

Service Marks

Landry’s Seafood House, Joe’s Crab Shack, Rainforest Cafe, Chart House and Charley’s Crab are each registered as a federal service mark on the Principal Register of the United States Patent and Trademark Office. The Crab House and Saltgrass Steak House are registered design marks. We pursue registration of our important service marks and trademarks and vigorously oppose any infringement upon them.

Competition

The restaurant industry is intensely competitive with respect to price, service, the type and quality of food offered, location and other factors. We compete with both locally owned restaurants, as well as national and regional restaurant chains, some of which may be better established in our existing and future markets. Many of these competitors have a longer history of operations with substantially greater financial resources. We also compete with other restaurant and retail establishments for real estate sites, restaurant personnel and for acquisition opportunities.

Changes in customer tastes, economic conditions, demographic trends and the location, number of, and type of food served by competing restaurants could affect our business as could a shortage of experienced management and hourly employees.

We believe our restaurants enjoy a high level of repeat business and customer loyalty due to high food quality, good perceived price-value relationship, comfortable atmosphere, and friendly efficient service.

Other factors relating to our competitive position in the industry are addressed under the sections entitled “Strategy,” “Purchasing,” and “Advertising and Marketing” elsewhere in this report.

Rainforest International License and Joint Venture Agreements

Rainforest Cafe has entered into exclusive license arrangements relating to the operations and development of Rainforest Cafes in the United Kingdom, Japan, France and Mexico. There are eight international units in operation, including seven franchised units and one Company owned and operated unit in Toronto, Canada. Four international franchised units were closed between 2002 and early 2003 due to declining sales and profitability. We own various equity interests in several of the international locations, which were included when we acquired Rainforest Cafe in 2000. We do not anticipate revenues from international franchises to be significant.

Information as to Classes of Similar Products or Services

We operate in only one industry segment. All significant revenues and pre-tax earnings relate to retail sales of food, beverages and complementary merchandise and services to the general public through company-owned and company-operated properties, substantially all located in the United States.

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Risk Factors

The following are factors to be considered.

Some of our restaurants have limited operating histories, which makes it difficult for us to predict their future results of operations.

A number of our restaurants have been open for less than two years. Consequently, the earnings achieved to date by such restaurants may not be indicative of future operating results. Should enough of these restaurants underperform our estimate of their performance, it could have a material adverse effect on our operating results.

Because many of our restaurants are concentrated in single geographic areas, our results of operations could be materially adversely affected by regional events.

Many of our existing and planned restaurants are concentrated in the southern half of the United States. This concentration in a particular region could affect our operating results in a number of ways. For example, our results of operations may be adversely affected by economic conditions in that region and other geographic areas into which we may expand. Also, given our present geographic concentration, adverse publicity relating to our restaurants could have a more pronounced adverse effect on our overall revenues than might be the case if our restaurants were more broadly dispersed. In addition, in view of the location of many of our existing restaurants in the Gulf Coast area from Texas to Florida, we are particularly susceptible to damage caused by hurricanes or other severe weather conditions. While we maintain business interruption insurance, there can be no assurance that if a severe hurricane or other natural disaster should affect our geographical areas of operations, we would be able to maintain our current level of operations or profitability.

If we are unable to obtain a seafood supply in sufficient quality and quantity to support our operations, our results of operations could be materially adversely affected.

In the recent past, certain types of seafood have experienced fluctuations in availability. We have in the past utilized several seafood suppliers and have not experienced any difficulty in obtaining adequate supplies of fresh seafood on a timely basis. In addition, some types of seafood have been subject to adverse publicity due to certain levels of contamination at their source, which can adversely affect both supply and market demand. We maintain an in-house inspection program for our seafood purchases and, in the past, have not experienced any detriment from contaminated seafood. However, we can make no assurances that in the future either seafood contamination or inadequate supplies of seafood might not have a significant and materially adverse effect on our operating results and profitability.

If we are unable to anticipate and react to changes in food and other costs, our results of operations could be materially adversely affected.

Our profitability is dependent on our ability to anticipate and react to increases in food, labor, employee benefits, and similar costs over which we have limited or no control. Specifically, our dependence on frequent deliveries of fresh seafood and produce subjects us to the risk of possible shortages or interruptions in supply caused by adverse weather or other conditions that could adversely affect the availability and cost of such items. Our business may also be affected by inflation. In the past, management has been able to anticipate and avoid any adverse effect on our profitability from increasing costs through our purchasing practices and menu price adjustments, but there can be no assurance that we will be able to do so in the future.

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The restaurant industry is peculiarly affected by trends and fluctuations in demand and is highly competitive. If we are unable to successfully surmount these challenges presented by the restaurant industry, our business and results of operations could be materially adversely affected.

The restaurant industry is intensely competitive and is affected by changes in consumer tastes and by national, regional, and local economic conditions and demographic trends. The performance of individual restaurants may be affected by factors such as:

• traffic patterns,

• demographic considerations,

• the amounts spent on, and the effectiveness of, our marketing efforts;

• weather conditions, and

• the type, number, and location of competing restaurants.

We have many well established competitors with greater financial resources and longer histories of operation than ours, including competitors already established in regions where we are planning to expand, as well as competitors planning to expand in the same regions. We face significant competition from mid-priced, full-service, casual dining restaurants offering seafood and other types and varieties of cuisine. Our competitors include national, regional, and local chains as well as local owner-operated restaurants. We also compete with other restaurants and retail establishments for restaurant sites.

Our growth strategy depends on opening new restaurants. Our ability to expand our restaurant base is influenced by factors beyond our control, which may slow restaurant development and expansion and impair our growth strategy.

We are pursuing an aggressive but disciplined growth strategy which, to be successful, will depend in large part on our ability to open new restaurants and to operate these restaurants on a profitable basis. We anticipate that our new restaurants will generally take several months to reach planned operating levels due to inefficiencies typically associated with new restaurants, including lack of market awareness, the need to hire and train sufficient personnel and other factors. We cannot guarantee that we will be able to achieve our expansion goals or operating results similar to those of our existing restaurants. One of our biggest challenges in meeting our growth objectives will be to locate and secure an adequate supply of suitable new restaurant sites. We have experienced delays in opening some of our restaurants and may experience delays in the future. Delays or failures in opening new restaurants could materially and adversely affect our planned growth. The success of our planned expansion will depend upon numerous factors, many of which are beyond our control, including the following:

• the hiring, training and retention of qualified personnel, especially managers;

• reliance on the knowledge of our executives to identify available and suitable restaurant sites;

• competition for restaurant sites;

• negotiation of favorable lease terms;

• timely development of new restaurants, including the availability of construction materials and labor;

• management of construction and development costs of new restaurants;

• securing required governmental approvals and permits in a timely manner, or at all;

• cost and availability of capital;

• competition in our markets; and

• general economic conditions.

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In addition, we contemplate entering new markets in which we have no operating experience. These new markets may have different demographic characteristics, competitive conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause the new restaurants to be less successful in these new markets than in our existing markets.

Our growth strategy may strain our management, financial and other resources. For instance, our existing systems and procedures, restaurant management systems, financial controls, information systems, management resources and human resources may be inadequate to support our planned expansion of new restaurants. We may not be able to respond on a timely basis to all of the changing demands that the planned expansion will impose on our infrastructure and other resources.

The cost of compliance with the significant governmental regulation to which we are subject or our failure to comply with such regulation could materially adversely affect our results of operations.

The restaurant industry is subject to extensive state and local government regulation relating to the sale of food and alcoholic beverages and to sanitation, public health, fire and building codes. Alcoholic beverage control regulations require each of our restaurants to apply for and obtain from state authorities a license or permit to sell alcohol on the premises. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations affect various aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, storage and dispensing of alcoholic beverages. In certain states, we may be subject to “dram shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from the establishment which wrongfully served alcoholic beverages to the intoxicated person. We carry liquor liability coverage as part of our comprehensive general liability insurance.

Our operations may be impacted by changes in federal and state taxes and other federal and state governmental policies which include many possible factors such as:

• the level of minimum wages,

• the deductibility of business and entertainment expenses,

• levels of disposable income and unemployment, and

• national and regional economic growth.

There are various federal, state and local governmental initiatives to increase the level of minimum wages which would increase our labor costs.

Difficulties or failures in obtaining required licensing or other regulatory approvals could delay or prevent the opening of a new restaurant. The suspension of, or inability to renew a license could interrupt operations at an existing restaurant, and the inability to retain or renew such licenses would adversely affect the operations of such restaurant. Our operations are also subject to requirements of local governmental entities with respect to zoning, land use and environmental factors which could delay or prevent the development of new restaurants in particular locations.

At the federal and state levels, there are from time to time various proposals and initiatives under consideration to further regulate various aspects of our business and employment regulations. These and other initiatives could adversely affect us as well as the restaurant industry in general. In addition, seafood is harvested on a world-wide basis and, on occasion, imported seafood is subject to federally imposed import duties.

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Our business is subject to seasonal fluctuations, and, as a result, our results of operations for any given quarter may not be indicative of the results that may be achieved for the full fiscal year.

Our business is subject to seasonal fluctuations. Historically, our highest earnings have occurred in the second and third quarters of the fiscal year, as our revenues in most of our restaurants have typically been higher during the second and third quarters of the fiscal year. As a result, results of operations for any single quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. Quarterly results have been, and in the future will continue to be, significantly impacted by the timing of new restaurant openings and their respective pre-opening costs.

Our international operations subject us to certain external business risks that do not apply to our domestic operations.

Rainforest Cafe has license arrangements relating to the operations and development of Rainforest Cafes in the United Kingdom, Japan, France, Mexico, Canada. These agreements include a per unit development fee and restaurant royalties ranging from 3% to 7% of revenues. There are eight international units in operation; one is owned outright, and the rest are franchises. We own various equity interests in several of the international franchise locations. Our international operations will be subject to certain external business risks such as exchange rate fluctuations, political instability and the significant weakening of a local economy in which a foreign unit is located. In addition, it may be more difficult to register and protect our intellectual property rights in certain foreign countries.

If we are unable to protect our intellectual property rights, it could reduce our ability to capitalize on our brand names, which could have an adverse affect on our business and results of operations.

Landry’s Seafood House, Joe’s Crab Shack, Rainforest Cafe, Charley’s Crab and Chart House are each registered as a federal service mark on the Principal Register of the United States Patent and Trademark Office. The Crab House and Saltgrass Steak House are registered design marks. We pursue registration of our important service marks and trademarks and vigorously oppose any infringement upon them. There is no assurance that any of our rights in any of our intellectual property will be enforceable, even if registered, against any prior users of similar intellectual property or against any of our competitors who seek to utilize similar intellectual property in areas where we operate or intend to conduct operations. The failure to enforce any of our intellectual property rights could have the effect of reducing our ability to capitalize on our efforts to establish brand equity.

We face the risk of adverse publicity and litigation, the cost of which could have a material adverse effect on our business and results of operations.

We may from time to time be the subject of complaints or litigation from customers alleging illness, injury or other food quality, health or operational concerns. Publicity resulting from these allegations may materially adversely affect us, regardless of whether the allegations are valid or whether we are liable. In addition, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may divert our financial and management resources that would otherwise be used to benefit the future performance of our operations, a significant increase in the number of these claims or an increase in the number of successful claims could materially adversely affect our business, prospects, financial condition, operating results and/or cash flows.

Unfavorable publicity relating to one or more of our restaurants in a particular brand may taint public perception of the brand.

Multi-unit restaurant business can be adversely affected by publicity resulting from poor food quality, illness or other health concerns or operating issues stemming from one or a limited number of restaurants. In particular, since the Company depends heavily on the “Joe’s Crab Shack” brand for a majority of its revenues,

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unfavorable publicity relating to one or more Joe’s Crab Shack restaurants could have a material adverse effect on the Company’s business, results of operations, and financial condition.

Rising interest rates would increase our borrowing costs, which could have a material adverse effect on our business and results of operations.

We currently have, and may incur, additional indebtedness that bears interest at variable rates. Accordingly, if interest rates increase, so will our interest costs, which may have an adverse effect on our business, results of operations and financial condition.

The capital costs of operations in our specialty growth division are extremely high. As a result, the failure of any one of these could have a material adverse effect on our operations.

In connection with operations in our specialty growth division, including the construction of the Inn at the Ballpark, the Downtown Aquariums in Houston and Denver, etc., we are incurring significant capital expenditures. As a result, if any one or more of these projects fail, there could be a significant affect on our financial condition and operations.

The loss of Tilman J. Fertitta could have a material adverse effect on our business and development.

We believe that the development of our business has been, and will continue to be, dependent on Tilman J. Fertitta, our Chief Executive Officer, President, and Chairman of the Board. The loss of Mr. Fertitta’s services could have a material adverse effect upon our business and development, and there can be no assurance that an adequate replacement could be found for Mr. Fertitta in the event of his unavailability.

Other risk factors may adversely affect our financial performance.

Other risk factors that could cause our actual results to differ materially from those indicated in the Forward-Looking Statements in this prospectus include, without limitation, changes in travel and outside dining habits as a result of SARS, terrorist activities perceived or otherwise, weather and other acts of God. In addition, a terrorist attack on certain of our restaurants could have a material adverse effect on our business and results of operation.

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ITEM 2.  PROPERTIES

Restaurant Locations

For information concerning the location of our restaurants see “Business—Restaurant Locations.”

Our corporate office in Houston, Texas is a multi-story building owned by us and includes meeting and training facilities, and a research and development test kitchen. We also own and operate approximately 75,000 square feet of warehouse facilities used primarily for construction activities and related storage and retail goods storage and distribution related activities.

ITEM 3.  LEGAL PROCEEDINGS

In January 2002, Rainforest Cafe, Inc., our wholly-owned subsidiary, was sued by EklecCo, L.L.C., in the Supreme Court of the State of New York in Onondaga County. EklecCo is seeking damages, and costs as a result of Rainforest Cafe’s alleged breach of a restaurant lease entered into in 1996 for a Rainforest Cafe unit formerly located in the Palisades Mall. Rainforest Cafe believes that it has no liability for damages beyond the personal property located in the premises at the time it vacated the premises. Rainforest Cafe is defending this case vigorously. Because the case is in its early stages, the financial impact to the Company, if any, cannot be predicted.

On July 31, 2002, and subsequently amended, a purported collective action lawsuit against us entitled Meaghan Bollenberg, et. al. v. Landry’s Restaurants, Inc. was filed in the United States District Court for the Northern District of Illinois, and subsequently moved to a Court in the Southern District of Texas. The lawsuit was filed by six plaintiffs who were servers on behalf of themselves and others similarly situated. The lawsuit alleges that the Company violated certain minimum wage laws under the federal Fair Labor Standards Act and seeks damages and costs. The Company is vigorously defending this litigation. Because the case is in its early stages, the financial impact to the Company, if any, cannot be predicted.

Former shareholders of approximately 4.4 million shares of Rainforest Cafe, Inc. dissented to the merger between the Company and Rainforest Cafe, seeking an amount in excess of $3.25 per share paid by the Company. An appraisal proceeding was held before a Minnesota District Court Judge in early January 2003. The appraisal trial ended with a ruling in the Company’s favor. In July 2003, the ruling was appealed by the dissenters. The appeal hearing was held and a ruling is expected by April 2004.

General Litigation

We are subject to other legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the outcome of any of those matters will have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any matters to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2003.

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PART II

ITEM 5.  MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

Our common stock trades on the New York Stock Exchange under the symbol “LNY.” As of January 30, 2004, there were approximately 1,134 stockholders of record of the common stock.

The table below sets forth, for the periods indicated, the high and low sale prices as reported on the New York Stock Exchange.

	High		Low
2002
First Quarter	$	26.90	$	18.00
Second Quarter		29.10		22.45
Third Quarter		25.51		17.55
Fourth Quarter		24.90		17.80
2003
First Quarter	$	21.68	$	15.05
Second Quarter		24.71		16.35
Third Quarter		24.00		19.36
Fourth Quarter		26.78		20.60

Dividend Policy

Commencing in 2000, we began to pay an annual $0.10 per share dividend, declared and paid in quarterly installments of $0.025 per share. The actual declaration and payment of cash dividends depends upon our actual earnings levels, capital requirements, financial condition, and other factors deemed relevant by the Board of Directors.

Stock Repurchase

In November 1998, we announced the authorization of an open market stock buy back program, and renewed it April 2000, for an additional $36 million. These programs have resulted in our aggregate repurchasing of approximately 10.6 million shares of common stock for approximately $94 million through December 31, 2003. In October 2002, we authorized a $50 million open market stock buy back program and in September 2003, we authorized another $60 million open market stock repurchase program.

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ITEM 6.  SELECTED FINANCIAL DATA

The following table contains selected consolidated financial data for each of the past five fiscal years. All numbers are in thousands, except per share data:

SELECTED CONSOLIDATED FINANCIAL INFORMATION

	Year Ended December 31,
	2003			2002			2001			2000			1999
INCOME STATEMENT DATA
Revenues	$	1,105,755		$	894,795		$	746,642		$	520,980		$	438,986
Operating costs and expenses:
Cost of revenues		321,783			257,945			219,684			156,787			136,321
Restaurant labor		323,284			259,198			215,662			147,192			125,566
Other restaurant operating expenses		269,948			222,711			185,186			122,099			101,563
General and administrative expenses		51,704			43,384			38,004			26,652			21,354
Depreciation and amortization (1)		61,969			42,680			37,147			33,392			22,230
Restaurant pre-opening expenses		8,650			4,591			2,598			3,402			3,764
Store closings and charges (3)		—			—			—			2,000			2,945
Total operating costs and expenses		1,037,338			830,509			698,281			491,524			413,743
Operating income		68,417			64,286			48,361			29,456			25,243
Other (income) expense:
Interest (income) expense, net		9,561			4,997			9,402			6,617			1,965
Other, net		1,463			(887	)		(56	)		887			(178	)
Total other (income) expense		11,024			4,110			9,346			7,504			1,787
Income before taxes		57,393			60,176			39,015			21,952			23,456
Provision for income taxes		11,492	(2)		18,654			12,095			7,302			8,080
Net income	$	45,901		$	41,522		$	26,920		$	14,650		$	15,376
Earnings per share information:
Basic:
Net income	$	1.66		$	1.60		$	1.24		$	0.63		$	0.58
Average number of common shares outstanding		27,600			25,900			21,750			23,400			26,675
Diluted:
Net income	$	1.62		$	1.54		$	1.19		$	0.62		$	0.57
Weighted average number of common shares and equivalents outstanding		28,325			26,900			22,535			23,600			27,025
OTHER DATA
EBITDA (Earnings before interest, taxes, depreciation, and amortization)
Total Operating Income	$	68,417		$	64,286		$	48,361		$	29,456		$	25,243
Add back depreciation and amortization		61,969			42,680			37,147			33,392			22,230
EBITDA	$	130,386		$	106,966		$	85,508		$	62,848		$	47,473
As adjusted amounts:
Net income as reported	$	45,901		$	41,522		$	26,920		$	14,650		$	15,376
Special charges, net of tax		4,119			1,518			1,656			5,651			1,929
Adjusted net income	$	50,020		$	43,040		$	28,576		$	20,301		$	17,305
Earnings per share as reported (diluted)	$	1.62		$	1.54		$	1.19		$	0.62		$	0.57
Special Charges per share		0.15			0.06			0.08			0.24			0.07
Adjusted Earnings per share	$	1.77		$	1.60		$	1.27		$	0.86		$	0.64
BALANCE SHEET DATA (AT END OF PERIOD)
Working capital (deficit)	$	(38,977	)	$	(55,685	)	$	(6,017	)	$	(39,657	)	$	17,430
Total assets	$	1,102,786		$	933,015			690,171			663,875			496,726
Short-term notes payable and current portion of notes and other obligations	$	1,963			1,783			—			60			93
Long-term notes and other obligations, noncurrent	$	299,736			189,404			175,000			155,000			68,060
Stockholders’ equity	$	604,551		$	567,075		$	393,671		$	364,553		$	377,348

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(1) In 2003, 2002, 2001 and 2000, we recorded asset impairment charges of $13.2 million ($9.1 million after tax), $2.2 million ($1.5 million after tax), $2.4 million ($1.6 million after tax) and $6.3 million ($4.3 million after tax), respectively, related to the adjustment to estimated fair value of certain restaurant properties and assets.

(2) In 2003, we recognized a $6.3 million income tax benefit for a reduction of the valuation allowance and deferred tax liabilities attributable to tax benefits deemed realizable and reduced accruals.

(3) In the second quarter of 2000, we recorded a $2.0 million special charge to expense merger costs for our initial failed offer to acquire Rainforest Cafe. We incurred $2.9 million in store closings and special charges during 1999, which comprised the net result of $3.7 million in transaction costs as the result of a terminated merger agreement with another company during the first quarter of 1999, and the reversal of an accrual (income) of $0.7 million related to favorable lease settlement terminations during the second quarter of 1999.

Earnings per share and net income adjusted for the asset impairment/abandonment charge, lease termination accrual and tax benefit (collectively called “special charges”) and EBITDA are not generally accepted accounting principles (“GAAP”) measurements and are presented solely as a supplemental disclosure because the Company believes that they are widely used measures of operating performance in the restaurant industry.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

We own and operate full-service, casual dining restaurants. As of December 31, 2003, we operated 286 restaurants. In addition to these units, there were several limited menu restaurants and other properties and two restaurants that were closed temporarily for renovation.

In February 2002, we acquired 15 seafood restaurants located primarily in Michigan and Florida in connection with the acquisition of C.A. Muer, Inc., (the “Muer Acquisition”). In August 2002, we purchased 27 Chart House seafood restaurants, located primarily on the East and West Coasts of the United States. These acquisitions included plans for the redevelopment of ten additional lower profitability restaurants, which were also then acquired, into Joe’s Crab Shack restaurants, and the sale or disposal of approximately six additional acquired, but non-strategic locations. In October 2002, we purchased 27 Texas-based Saltgrass Steak House restaurants.

The restaurant industry is intensely competitive and is affected by changes in consumer tastes and by national, regional, and local economic conditions and demographic trends. The performance of individual restaurants may be affected by factors such as: traffic patterns, demographic considerations, marketing, weather conditions, and the type, number, and location of competing restaurants.

We have many well established competitors with greater financial resources, larger marketing and advertising budgets, and longer histories of operation than ours, including competitors already established in regions where we are planning to expand, as well as competitors planning to expand in the same regions. We face significant competition from mid-priced, full-service, casual dining restaurants offering or promoting seafood and other types and varieties of cuisine. Our competitors include national, regional, and local chains as well as local owner-operated restaurants. We also compete with other restaurants and retail establishments for restaurant sites. We intend to pursue an acquisition strategy.

In this report, we have made forward-looking statements. Our forward-looking statements are subject to risks and uncertainty, including without limitation, our ability to continue our expansion strategy, our ability to

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make projected capital expenditures, as well as general market conditions, competition, and pricing. Forward-looking statements include statements regarding: future capital expenditures (including the amount and nature thereof); business strategy and measures to implement that strategy; competitive strengths; goals; expansion and growth of our business and operations; future commodity prices; availability of food products, materials and employees; consumer perceptions of food safety; changes in local, regional and national economic conditions; the effectiveness of our marketing efforts; changing demographics surrounding our restaurants; the effect of tax laws, and any changes therein; same store sales; earnings guidance; the seasonality of our business; weather and acts of God; food, labor, fuel and utilities costs; plans; references to future success as well as other statements which include words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and other similar expressions. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, we cannot assure you that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

Results of Operations

Restaurant Profitability

The following table sets forth the percentage relationship to total restaurant revenues of certain restaurant operating data for the periods indicated:

	Year Ended December 31,
	2003		2002		2001
Revenues	100.0	%	100.0	%	100.0	%
Cost of revenues	29.1		28.8		29.4
Restaurant labor	29.2		29.0		28.9
Other restaurant operating expenses	24.4		24.9		24.8
Restaurant level profit	17.3	%	17.3	%	16.9	%

Year ended December 31, 2003 Compared to the Year ended December 31, 2002

Revenues increased $210,960,436, or 23.6%, from $894,794,621 to $1,105,755,057 for the year ended December 31, 2003, compared to the year ended December 31, 2002. The increase in revenues was primarily attributable to revenues from new restaurant openings and revenues from acquisitions completed in 2002.

As a primary result of increased revenues, cost of revenues increased $63,838,636, or 24.7%, from $257,944,741 to $321,783,377 in the year ended December 31, 2003, compared to the same period in the prior year. Cost of revenues as a percentage of revenues for the year ended December 31, 2003, increased to 29.1%, from 28.8% in 2002. The increase in cost of revenues as a percentage of revenues primarily reflects the higher cost of sales from the Saltgrass and other 2002 acquisitions, and higher product costs at the Company’s seafood restaurants.

Restaurant labor expenses increased $64,086,435, or 24.7%, from $259,197,964 to $323,284,399 in the year ended December 31, 2003, compared to the same period in the prior year, principally as a result of increased revenues. Restaurant labor expenses as a percentage of revenues for the year ended December 31, 2003, increased to 29.2% from 29.0% in 2002, principally due to inefficiencies attributable to a comparatively large number of new unit openings during the 2003 period.

Other restaurant operating expenses increased $47,236,875, or 21.2%, from $222,710,506 to $269,947,381 in the year ended December 31, 2003, compared to the same period in the prior year, principally as a result of

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increased revenues. Such expenses decreased as a percentage of revenues to 24.4% in 2003 from 24.9% in 2002, as a primary result of lower rent expense from the acquired Saltgrass Steak House restaurants.

General and administrative expenses increased $8,320,301, or 19.2%, from $43,383,799 to $51,704,100 in the year ended December 31, 2003, compared to the same period in the prior year, and decreased as a percentage of revenues to 4.7% in 2003 from 4.8% in 2002. The dollar increase was a result of increased personnel and travel required to support our operations. Such expenses decreased as a percentage of revenues as a result of increased revenues from acquisitions and new restaurants thereby leveraging our corporate expenses.

Depreciation and amortization expense increased $19,288,838, or 45.2%, from $42,680,020 to $61,968,858 in the year ended December 31, 2003, compared to the same period in the prior year. The increase for 2003 was primarily due to the addition of new restaurants and equipment and restaurant acquisitions. Asset impairment charges of $13,200,000 and $2,200,000 relating to underperforming and closed restaurants were included in the 2003 and 2002 amounts, respectively.

Restaurant pre-opening expenses were $8,650,178 for the year ended December 31, 2003, compared to $4,590,972 for the same period in the prior year. The increase for the 2003 period was attributable to an increase in units opened in 2003 as compared to 2002.

The increase in net interest expense in the year ended December 31, 2003, as compared to the prior year, is primarily due to our higher borrowings. Other expense for 2003 is primarily expenses related to abandoned development projects. Other expense (income) for 2002 includes additional income of $1,100,000 for a settlement from a vendor, and a gain of $875,000 on investment assets held for sale reduced by a loss of $1,500,000 on similar assets during the last six months of 2002.

Provision for income taxes decreased by $7,162,860 to $11,491,778 in the year ended December 31, 2003 from $18,654,638 in 2002 primarily due to changes in our pre-tax income offset by a $6,300,000 income tax benefit gained from a reduction of the valuation allowance and deferred tax liabilities attributable to tax benefits deemed realizable and reduced accruals.

Year ended December 31, 2002 Compared to the Year ended December 31, 2001

Revenues increased $148,152,334, or 19.8%, from $746,642,287 to $894,794,621 for the year ended December 31, 2002, compared to the year ended December 31, 2001. The increase in revenues was primarily attributable to revenues from new restaurant openings, a small same store sales increase for the Company’s seafood restaurants, offset by a slight decline in Rainforest Cafe restaurant revenues, and the inclusion of 2002 revenues from the Muer (since February 2002), Chart House (since August 2002) and Saltgrass Steak House restaurants (since October 2002) acquisitions.

As a primary result of increased revenues, cost of revenues increased $38,261,051, or 17.4%, from $219,683,690 to $257,944,741 in the year ended December 31, 2002, compared to the prior year. Cost of revenues as a percentage of revenues for the year ended December 31, 2002 decreased to 28.8% from 29.4% in 2001. The decrease in cost of revenues as a percentage of revenues primarily reflects menu changes and lower product costs in 2002 as compared to 2001, partially offset by the inclusion of Saltgrass Steak House restaurants (since October 2002) with higher than Company average cost of sales margins.

Restaurant labor expenses increased $43,535,944, or 20.2%, from $215,662,020 to $259,197,964 in the year ended December 31, 2002, compared to the prior year. Restaurant labor expenses as a percentage of revenues for the year ended December 31, 2002, increased to 29.0% from 28.9% in 2001, as a primary result of higher labor costs at the restaurants purchased in recent acquisitions, partially offset by increases in hourly labor productivity.

Other restaurant operating expenses increased $37,524,400, or 20.3%, from $185,186,106 to $222,710,506 in the year ended December 31, 2002, compared to the prior year, principally as a result of increased revenues.

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Such expenses increased as a percentage of revenues to 24.9% in 2002 from 24.8% in 2001, as a primary result of higher marketing and advertising expenses, partially offset by lower utility costs.

General and administrative expenses increased $5,380,311, or 14.2%, from $38,003,488 to $43,383,799 in the year ended December 31, 2002, compared to the prior year, and declined as a percentage of revenues to 4.8% in 2002 from 5.1% in 2001. The dollar increase resulted primarily from increased personnel to support our expanded operations. The decrease as a percentage of revenues is the primary result of increased leverage from higher revenues increasing more than expenses.

Depreciation and amortization expense increased $5,532,695, or 14.9%, from $37,147,325 to $42,680,020 in the year ended December 31, 2002, compared to the prior year. The dollar increase was primarily due to the addition of new restaurants and equipment and the restaurant acquisitions in 2002, and asset impairment charges of $2,200,000 in 2002, compared to $2,394,000 in 2001.

Restaurant pre-opening expenses were $4,590,972 for the year ended December 31, 2002, compared to $2,598,293 for the same period in the prior year. The increase for the 2002 period was attributable to an increase in units opened in 2002 as compared to 2001.

The decrease in net interest expense for the year ended December 31, 2002, as compared to the prior year, is substantially due to reduced borrowings as a result from repayments using proceeds of a secondary stock offering we completed in April 2002. Also, the average borrowing rate declined by approximately 1.3 percentage points between December 31, 2001 to December 31, 2002. The change in other expense (income), includes additional income of $1,100,000 from a settlement from a vendor and a gain of $875,000 on investment assets held for sale reduced by a loss of $1,500,000 on similar assets during the last six months of 2002.

Provision for income taxes increased by $6,558,908 to $18,654,638 in 2002 from $12,095,730 in 2001 primarily due to changes in our pre-tax income.

Liquidity and Capital Resources

During the year, the Company increased its total borrowing capacity to $350 million through the closing of two separate financing agreements, which allow for increased financing permitted under the existing agreements. The terms of these agreements are outlined below. With the financing we intend to continue our planned growth. We plan to fund 2004 capital expenditures and any additional restaurant or business acquisitions out of proceeds from existing cash balances, 2003 tax refunds aggregating $9 million, cash flow from operations and availability under our existing credit facilities. We expect to spend approximately $100.0 million on capital expenditures in 2004, on opening approximately 20 restaurants, refurbishments of existing restaurants and other projects. As a result of our tax loss carryforwards and deferred tax assets, including amounts attributable to the acquisition of Rainforest Cafe, we expect our cash flow from operations to be subject to reduced federal income tax payments for the foreseeable future, which will therefore provide additional cash flow for funding our business activities and debt service. As of January 30, 2004, the Company had approximately $38 million available under the existing credit facilities for expansion and working capital purposes.

In October 2003, the Company refinanced its bank credit facility by issuing long-term notes totaling $150.0 million through a private placement of debt (the “Senior Notes”) and amending and extending the existing bank credit facility to a four-year $200.0 million revolving credit facility (the “Bank Credit Facility”). The Senior Notes mature in October 2009 through October 2013, and the Bank Credit Facility matures in October 2007. Interest on the Senior Notes is paid quarterly at an average rate of 5.95%. Interest on the Bank Credit Facility is payable monthly or quarterly at LIBOR or the bank’s base rate plus a financing spread. The Company’s financing spread under the Bank Credit Facility is presently 1.875% for LIBOR borrowings. The Senior Notes and Bank Credit Facility are secured by stock of subsidiaries, and governed by certain financial covenants, including maximum leverage ratio, maximum indebtedness, net worth, and fixed charge ratio tests. The Bank

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Credit Facility additionally provides for limitations on annual capital expenditures to prescribed amounts, maximum annual cash dividends and limitations on repurchases of common stock. The Bank Credit Facility also provides the ability to add an additional $25.0 million of capacity within the facility and other permitted indebtedness.

A wholly-owned subsidiary of ours assumed an $11.4 million 9.39% non-recourse, long-term note payable (due May 2010) in connection with an asset purchase in March 2003. Principal and interest payments under this note aggregate $102,000 monthly.

During the year ended December 31, 2003, the Company repurchased $8.4 million of common stock. In September 2003, the Company authorized an open market stock repurchase program for $60.0 million. The Company expects to make opportunistic repurchases of its common stock.

As of December 31, 2003, the Company had contractual obligations as described below. These obligations are expected to be funded primarily through cash flow from operations, working capital and additional financing sources in the normal course of business operations.

Contractual Obligations (in thousands)	Less than 1 Year		2-3 Years		4-5 Years		After 5 Years
Operating Leases	$	44,927	$	85,468	$	72,038	$	279,319
Long-Term Debt	$	1,963	$	4,013	$	4,510	$	169,213
Unconditional Purchase Obligations	$	37,509	$	7,946	$	3,745	$	1,771
Other Long-Term Obligations	$	2,222	$	4,444	$	11,788	$	15,000
Total Cash Obligations	$	86,621	$	101,871	$	92,081	$	465,303
Other Commercial Commitments (in thousands)	Less than 1 Year		2-3 Years		4-5 Years		After 5 Years
Line of Credit	$	—	$	—	$	122,000	$	—
Standby Letters of Credit	$	10,084	$	—	$	—	$	—
Total Commercial Commitments	$	10,084	$	—	$	122,000	$	—

From time to time, we review opportunities for restaurant acquisitions and investments in the hospitality, entertainment, amusement, food service and facilities management and other industries. Our exercise of any such investment opportunity may impact our development plans and capital expenditures. We believe that adequate sources of capital are available to fund our business activities through December 31, 2004.

As a primary result of establishing long-term borrowings, the Company will incur higher interest expense in the future. However, the Company has mitigated a portion of the higher immediate interest expense by entering into two fair value hedges aggregating notional amounts of $75.0 million, whereby the Company swapped higher fixed interest rates of the Senior Notes for floating interest rates equal to three (3)-month LIBOR plus 1.71%.

Since April 2000, we have paid an annual $0.10 per share dividend, declared and paid in quarterly amounts. The Company is currently reviewing its dividend policy to determine if the annual per share dividend will be increased in 2004.

Seasonality and Quarterly Results

Our business is seasonal in nature. Our reduced winter volumes cause revenues and, to a greater degree, operating profits to be lower in the first and fourth quarters than in other quarters. We have and continue to open restaurants in highly seasonal tourist markets. Joe’s Crab Shack restaurants tend to experience even greater seasonality and sensitivity to weather than our other restaurant concepts. Periodically, our sales and profitability may be negatively affected by adverse weather. The timing of unit openings can and will affect quarterly results.

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Critical Accounting Policies

Restaurant and other properties are reviewed on a property by property basis for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of properties that are to be held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying amount of the asset. If such assets are considered to be impaired, an impairment charge is recorded in the amount by which the carrying amount of the assets exceeds their fair value. Properties to be disposed of are reported at the lower of their carrying amount or fair value, reduced for estimated disposal costs, and are included in other current assets.

We follow the intrinsic value method of accounting for stock options, and as such do not record compensation expense related to amounts outstanding.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities” in January 2003. This interpretation provides guidance on the identification of, and financial reporting for, variable interest entities. Variable interest entities are entities that lack the characteristics of a controlling financial interest or lack sufficient equity to finance its activities without additional subordinated financial support. FIN 46 requires a company to consolidate a variable interest entity if that company is obligated to absorb the majority of the entity’s expected losses or entitled to receive the majority of the entity’s residual returns, or both. The Company does not believe that FIN 46 will have a material impact on the Company’s consolidated financial statements.

The FASB issued SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure” in December 2002. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No. 123 to require more prominent and frequent disclosures in financial statements about the effects of stock-based compensation. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for financial statements issued for fiscal years ending after December 15, 2002. The interim disclosure provisions were adopted for the three months ended March 31, 2003. Adoption of SFAS No. 148 did not materially impact our consolidated financial statements.

The FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others” in November 2002. Interpretation No. 45 provides guidance on the recognition and disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees. The initial recognition and measurement provisions of Interpretation No. 45 are effective for guarantees issued or modified after December 31, 2002, and are to be applied prospectively. The disclosure requirements are effective for financial statements for interim or annual periods ended after December 15, 2002. The Company’s adoption of Interpretation No. 45 in 2003 did not materially impact our consolidated financial statements.

The FASB issued Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” in 2001. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets to Be Disposed Of,” and resolves significant implementation issues that had evolved since the issuance of SFAS No. 121. SFAS No. 144 also establishes a single accounting model for long-lived assets to be disposed of by sale. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and its provisions are generally to be applied prospectively. Adoption of SFAS No. 144, in 2002, did not materially impact our consolidated financial statements.

The FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” in June 2002. SFAS No. 146 provides guidance on the recognition and measurement of liabilities for costs

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associated with exit or disposal activities. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company’s adoption of SFAS No. 146 in 2002 did not materially impact our consolidated financial statements.

The FASB issued statement of Financial Accounting Standards (SFAS) No. 150 in May 2003. SFAS No. 150 establishes standards for classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for interim periods beginning after June 15, 2003. The Company’s adoption of SFAS No. 150 did not materially impact our consolidated financial statements.

Impact of Inflation

We do not believe that inflation has had a significant effect on our operations during the past several years. We believe we have historically been able to pass on increased costs through menu price increases, but there can be no assurance that we will be able to do so in the future. Future increases in restaurant labor costs, including expected future increases in federal minimum wages, land and construction costs could adversely affect our profitability and ability to expand.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of market risks including risks related to potential adverse changes in interest rates and commodity prices. We actively monitor exposure to market risk and continue to develop and utilize appropriate risk management techniques. We do not use derivative financial instruments for trading or to speculate on changes in commodity prices.

Interest Rate Risk

Total debt at December 31, 2003, included $122.0 million of floating-rate debt attributed to bank borrowings and $75.0 million of floating rate debt under interest rate swap agreements at an average interest rate of 3.1%. The floating-rate debt was refinanced in October 2003 by a combination of fixed and floating rate debt. As a result, our annual interest cost in 2004 will fluctuate based on short-term interest rates and will increase as a result of the refinancing of our obligations on a long-term fixed rate basis.

In connection with the Senior Notes, the Company entered into two interest swap agreements with the objective of reducing our exposure to interest rate risk and lowering interest expense. The agreements were effective beginning October 7, 2003 and mature in six years and seven years for an aggregate notional amount of $75 million.

The impact on annual cash flow of a ten percent change in the floating-rate (approximately 0.3%) would be approximately $0.6 million annually based on the floating-rate debt and other obligations outstanding at December 31, 2003, however, there are no assurances that possible rate changes would be limited to such amounts.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements are set forth commencing on page 34.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

During the fiscal year 2001, there were no changes in our independent public accountants, nor were there any disagreements with such accountants, and no reportable events occurred. In 2002, the Company reported that it had retained Ernst & Young LLP to replace Arthur Andersen LLP. Ernst & Young LLP remains the

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Company’s independent auditor through the date of this report. There are no disagreements with Ernst & Young LLP, and no reportable events occurred.

ITEM 9A.  CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a – 15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of December 31, 2003, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer conclude that our disclosure controls and procedures were effective as of December 31, 2003.

During the three months ended December 31, 2003, there was no change in our internal control over financial reporting (as defined in Rule 13a – 15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information relating to our directors and executive officers are incorporated by reference from our definitive Proxy Statement in connection with our Annual Meeting of Stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2003. The Company has adopted a code of ethics applicable to its chief executive officer, chief financial officer, controller and other financial officers, which is a “code of ethics” as defined by applicable rules of the Securities and Exchange Commission. A copy of our Code of Ethics is filed as an exhibit hereto. If the Company makes any amendments to this code other than technical, administrative, or other non-substantive amendments, or grants any waivers, including implicit waivers, from a provision of this code to the Company’s chief executive officer, chief financial officer or controller, the Company will disclose the nature of the amendment or waiver, its effective date and to whom it applies on its website or in a report on Form 8-K filed with the Securities and Exchange Commission.

ITEM 11.  EXECUTIVE COMPENSATION

Certain information relating to our directors and executive officers is incorporated by reference herein from our definitive Proxy Statement in connection with our Annual Meeting of Stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2003.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Certain information relating to our directors and executive officers are incorporated by reference herein from our definitive Proxy Statement in connection with our Annual Meeting of Stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2003.

Equity Compensation Plan Information

The following table provides information as of December 31, 2003 regarding the number of shares of Common Stock that may be issued under the Company’s equity compensation plans.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by the stockholders (1)	781,374	$	9.35	1,300,000
Equity compensation plans not approved by the stockholders (2)	1,629,500	$	13.23	700,000
Total	2,410,874	$	11.97	2,000,000

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(1) We have the following compensation plans under which awards have been issued or are authorized to be issued, which were adopted with stockholder approval:

(a) The Landry’s Restaurants, Inc. 2002 Employee/Rainforest Conversion Plan authorizes the issuance of up to 2,162,500 shares, all of which are currently held in our treasury. This plan allows awards of non-qualified stock options, which may include stock appreciation rights, to our consultants, employees and non-employee directors. The plan is administered by our compensation committee. Terms of the award, such as vesting and exercise price, are to be determined by the compensation committee and set forth in the grant agreement for each award.

(b) The Company maintains two stock option plans, which were originally adopted in 1993, (the Stock Option Plans), as amended, pursuant to which options may be granted to eligible employees and non-employee directors of the Company or its subsidiaries for the purchase of an aggregate of 2,750,000 shares of common stock of the Company. The Stock Option Plans are administered by the Stock Option Committee of the Board of Directors (the Committee), which determines at its discretion, the number of shares subject to each option granted and the related purchase price, vesting and option periods. The Committee may grant either non-qualified stock options or incentive stock options, as defined by the Internal Revenue Code of 1986, as amended.

(c) The Company also maintains the 1995 Flexible Incentive Plan, which was adopted in 1995, (Flex Plan), as amended, for key employees of the Company. Under the Flex Plan eligible employees may receive stock options, stock appreciation rights, restricted stock, performance awards, performance stock and other awards, as defined by the Board of Directors or an appointed committee. The aggregate number of shares of common stock which may be issued under the Flex Plan (or with respect to which awards may be granted) may not exceed 2,000,000 shares.

(2) We have the following compensation plans under which awards have been issued or are authorized to be issued, which were adopted without stockholder approval:

(a) The Landry’s Restaurants, Inc. 2003 Equity Incentive Plan authorizes the issuance of up to 700,000 shares, all of which are currently held in our treasury. This plan allows awards of both qualified and non-qualified stock options, restricted stock, cash equivalent values, and tandem awards to employees. The plan is administered by our compensation committee. Terms of the award, such as vesting and exercise price, are to be determined by the compensation committee and set forth in the grant agreement for each award.

(b) On July 22, 2002, we issued options to purchase an aggregate of 437,500 shares under individual stock option agreements with individual members of senior management. Options under these agreements were granted at market price and expire ten years from the date of grant. These options vest in equal installments over a period of five years, provided that vesting may accelerate on certain occurrences, such as a change in control or, in the case of options granted to our CEO, if our stock hits certain price targets.

(c) On July 22, 2002, we issued options to purchase an aggregate of 6,000 shares to our non-employee directors. Options under these agreements were granted at market price and expire ten years from the date of grant. These options vest in equal installments over a period of five years.

(d) On March 16, 2001, we issued options to purchase an aggregate of 387,500 shares to our senior management under individual stock option agreements with individual members of senior management. Options under these agreements were granted at market price and expire ten years from the date of grant. These options vest in equal installments over a period of five years, provided that vesting may accelerate on certain occurrences, such as a change in control or, in the case of options granted to our CEO, if our stock hits certain price targets.

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(e) On March 16 and September 13, 2001, options to purchase an aggregate of 240,000 shares were issued to certain of our individual employees, under individual option grant agreements. Options under these agreements were granted at market price and expire ten years from the date of grant. These options vest in equal installments over a period of five years, provided that vesting may accelerate on certain occurrences, such as a change in control.

(f) On April 27, 1995, Landry’s issued options to purchase an aggregate of 600,000 shares under an individual stock option agreement with Landry’s President and CEO. Options under the agreement were granted at market price and expire ten years from the date of grant. These options vested in equal installments over a period of three years.

(g) In addition, the Company will issue pursuant to an employment agreement, over its five year term, 500,000 shares of restricted stock, with a 10 year vest from grant date, and a minimum of 800,000 stock options. In August 2003, 100,000 restricted common shares were issued subject to vesting on the tenth anniversary.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain information relating to our directors and executive officers is incorporated by reference herein from our definitive Proxy Statement in connection with our Annual Meeting of Stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2003.

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PART IV

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Certain information regarding the fees we paid to our principal accountants, including Audit Fees, Audit-Related Fees, Tax Fees and all other fees is incorporated by reference herein from our definitive Proxy Statement in connection with our Annual Meeting of Stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2003.

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)	1.	Financial Statements
	The following financial statements are set forth herein commencing on page 34:
		— Report of Independent Auditors
		— Consolidated Balance Sheets as of December 31, 2003 and 2002
		— Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001
		— Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2003, 2002 and 2001
		— Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001
		— Notes to Consolidated Financial Statements
	2.	Financial Statement Schedules—Not applicable.
(b)	Reports on Form 8-K
		—On October 9, 2003, we filed an 8-K Report, reporting on Item 5, announcing our quarterly dividend and $150 million Private Placement of Senior Notes.
		—On October 28, 2003, we furnished an 8-K Report, reporting on Item 12, on press release announcing financial results for the third quarter ended September 30, 2003. Such report was not “filed” with the Securities and Exchange Commission.
(c)	Exhibits
		—All exhibits required by Item 601 of Regulation S-K are listed in the accompanying “Exhibit Index” which immediately precedes such exhibits, and is incorporated herein by reference.

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Landry’s Restaurants, Inc.

We have audited the consolidated balance sheets of Landry’s Restaurants, Inc. and Subsidiaries as of December 31, 2003 and 2002, and the consolidated statements of income, stockholders’ equity, and cash flows for the years then ended. 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. The financial statements of Landry’s Restaurants, Inc. and Subsidiaries as of December 31, 2001, and for the year then ended were audited by other auditors who have ceased operations and whose report dated February 4, 2002, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 2003 and 2002 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Landry’s Restaurants, Inc. and Subsidiaries at December 31, 2003 and 2002 and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

ERNST & YOUNG LLP

Houston, Texas

February 11, 2004

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Note: The report of Arthur Andersen LLP presented below is a copy of a previously issued Arthur Andersen LLP report and said report has not been reissued by Arthur Andersen LLP nor has Arthur Andersen LLP provided a consent to the inclusion of its report on this Form 10-K.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Landry’s Restaurants, Inc.:

We have audited the accompanying consolidated balance sheet of Landry’s Restaurants, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States. 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 Landry’s Restaurants, Inc., and subsidiaries as of December 31, 2001 and the results of their operations and their cash flows for each of three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas

February 4, 2002

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LANDRY’S RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2003			2002
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	35,211,319		$	13,878,199
Accounts receivable—trade and other		23,271,831			19,910,006
Inventories		47,772,298			40,879,375
Deferred taxes		6,858,350			6,227,519
Other current assets		7,490,383			11,774,016
Total current assets		120,604,181			92,669,115
PROPERTY AND EQUIPMENT, net		965,574,991			830,930,131
GOODWILL		7,527,547			2,434,547
OTHER ASSETS, net		9,078,787			6,981,286
Total assets	$	1,102,785,506		$	933,015,079
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	82,894,048		$	71,748,874
Accrued liabilities		74,512,641			74,237,570
Income taxes payable		211,131			584,531
Current portion of long-term notes and other obligations		1,963,189			1,783,427
Total current liabilities		159,581,009			148,354,402
LONG-TERM NOTES, NET OF CURRENT PORTION		299,735,906			189,403,599
DEFERRED TAXES		23,395,713			11,540,594
OTHER LIABILITIES		15,522,129			16,641,047
Total liabilities		498,234,757			365,939,642
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common Stock, $0.01 par value, 60,000,000 shares authorized, 27,653,852 and 27,771,479 issued and outstanding, respectively		276,539			277,715
Additional paid-in capital		439,616,066			441,338,043
Deferred Compensation		(1,868,750	)		—
Retained earnings		166,526,894			125,459,679
Total stockholders’ equity		604,550,749			567,075,437
Total liabilities and stockholders’ equity	$	1,102,785,506		$	933,015,079

The accompanying notes are an integral part of these consolidated financial statements.

34

LANDRY’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2003		2002			2001
REVENUES	$	1,105,755,057	$	894,794,621		$	746,642,287
OPERATING COSTS AND EXPENSES:
Cost of revenues		321,783,377		257,944,741			219,683,690
Restaurant labor		323,284,399		259,197,964			215,662,020
Other restaurant operating expenses		269,947,381		222,710,506			185,186,106
General and administrative expenses		51,704,100		43,383,799			38,003,488
Depreciation and amortization		61,968,858		42,680,020			37,147,325
Restaurant pre-opening expenses		8,650,178		4,590,972			2,598,293
Total operating costs and expenses		1,037,338,293		830,508,002			698,280,922
OPERATING INCOME		68,416,764		64,286,619			48,361,365
OTHER EXPENSE (INCOME):
Interest expense, net		9,561,482		4,997,022			9,402,351
Other, net		1,462,450		(886,657	)		(56,285	)
		11,023,932		4,110,365			9,346,066
INCOME BEFORE INCOME TAXES		57,392,832		60,176,254			39,015,299
PROVISION FOR INCOME TAXES		11,491,778		18,654,638			12,095,730
NET INCOME	$	45,901,054	$	41,521,616		$	26,919,569
EARNINGS PER SHARE INFORMATION:
BASIC
Net income	$	1.66	$	1.60		$	1.24
Average number of common shares outstanding		27,600,000		25,900,000			21,750,000
DILUTED
Net income	$	1.62	$	1.54		$	1.19
Average number of common and common share equivalents outstanding		28,325,000		26,900,000			22,535,000

The accompanying notes are an integral part of these consolidated financial statements.

35

LANDRY’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock					Additional Paid-In Capital			Deferred Stock Compensation			Retained Earnings			Total
	Shares		Amount
BALANCE, January 1, 2001	21,498,352		$	214,984		$	301,225,712		$	—		$	63,111,962		$	364,552,658
Net income	—			—			—			—			26,919,569			26,919,569
Dividends paid	—			—			—			—			(2,167,959	)		(2,167,959	)
Purchase of common stock held for treasury	(3,506	)		(35	)		(64,797	)		—			(11,572	)		(76,404	)
Exercise of stock options and tax benefit	501,523			5,015			4,437,744			—			—			4,442,759
BALANCE, December 31, 2001	21,996,369			219,964			305,598,659			—			87,852,000			393,670,623
Net income	—			—			—			—			41,521,616			41,521,616
Dividends paid	—			—			—			—			(2,500,387	)		(2,500,387	)
Issuance of common stock, net	5,297,500			52,975			132,524,341			—			—			132,577,316
Purchase of common stock held for treasury	(304,904	)		(3,049	)		(5,317,638	)		—			(1,413,550	)		(6,734,237	)
Exercise of stock options and tax benefit	782,514			7,825			8,532,681			—			—			8,540,506
BALANCE, December 31, 2002	27,771,479			277,715			441,338,043			—			125,459,679			567,075,437
Net income	—			—			—			—			45,901,054			45,901,054
Dividends paid	—			—			—			—			(2,768,997	)		(2,768,997	)
Purchase of common stock held for treasury	(468,823	)		(4,688	)		(6,347,881	)		—			(2,064,842	)		(8,417,411	)
Exercise of stock options and tax benefit	251,196			2,512			2,676,904			—			—			2,679,416
Issuance of restricted stock	100,000			1,000			1,949,000			(1,950,000	)		—			—
Amortization of deferred compensation	—			—			—			81,250			—			81,250
BALANCE December 31, 2003	27,653,852		$	276,539		$	439,616,066		$	(1,868,750	)	$	166,526,894		$	604,550,749

The accompanying notes are an integral part of these consolidated financial statements.

36

LANDRY’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	45,901,054		$	41,521,616		$	26,919,569
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sales of assets		—			(154,957	)		(565,822	)
Depreciation and amortization		61,968,858			42,680,020			37,147,325
Deferred taxes, net		11,224,288			6,807,586			9,678,776
Deferred rent and other charges (income)		(182,876	)		541,874			(241,155	)
Changes in assets and liabilities:
(Increase) decrease in trade and other receivables		(3,342,672	)		(3,826,716	)		(2,865,441	)
(Increase) decrease in inventories		(6,651,658	)		(4,044,169	)		1,189,511
(Increase) decrease in other assets		2,502,092			(6,709,943	)		3,425,250
Increase (decrease) in accounts payable and accrued liabilities		10,110,805			34,822,440			14,283,233
Total adjustments		75,628,837			70,116,135			62,051,677
Net cash provided by operating activities		121,529,891			111,637,751			88,971,246
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions		(162,894,783	)		(115,903,544	)		(73,462,974	)
Proceeds from sale of property and equipment		—			2,097,870			750,000
Business acquisitions, net of cash acquired		(27,035,893	)		(161,108,095	)		(32,580,607	)
Net cash used in investing activities		(189,930,676	)		(274,913,769	)		(105,293,581	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		—			132,577,316			—
Purchases of common stock for treasury		(8,417,411	)		(6,734,237	)		(76,404	)
Proceeds from exercise of stock options		1,826,816			7,134,631			3,548,144
Borrowings (payments) under credit line, net		(49,000,000	)		15,595,886			19,940,037
Borrowings (payments) on Senior Notes and other debt		148,093,497			—			—
Dividends paid		(2,768,997	)		(2,500,387	)		(2,167,959	)
Net cash provided by financing activities		89,733,905			146,073,209			21,243,818
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS		21,333,120			(17,202,809	)		4,921,483
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		13,878,199			31,081,008			26,159,525
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	35,211,319		$	13,878,199		$	31,081,008
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	8,675,327		$	5,567,196		$	10,230,853
Income taxes	$	5,698,821		$	8,689,374		$	—

The accompanying notes are an integral part of these consolidated financial statements.

37

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Landry’s Restaurants, Inc. (the “Company”) owns and operates primarily restaurants under the trade names of Landry’s Seafood House, Joe’s Crab Shack, The Crab House, Charley’s Crab, The Chart House and Saltgrass Steak House. In addition the Company owns and operates domestic and licenses international rainforest themed restaurants under the trade name Rainforest Cafe.

Principles of Consolidation

The accompanying financial statements include the consolidated accounts of Landry’s Restaurants, Inc., a Delaware holding company and its wholly and majority owned subsidiaries and partnership.

Revenue Recognition

The Company records revenue from the sale of food, beverage, alcohol, and retail as products are sold. Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue when redeemed by the holder.

Accounts Receivable

Accounts receivable is comprised primarily of amounts due from the Company’s credit card processor and receivables from national storage and distribution companies with which we contract to provide services. Transactions between the Company and the national storage and distribution companies do not have an impact on our consolidated statements of income. Also included in accounts receivable is income tax receivables of $9.2 million and $3.1 million in 2003 and 2002, respectively.

Inventories

Inventories consist of food and beverages used in restaurant operations and complementary retail goods and are recorded at the lower of cost or market value as determined by the average cost for food and beverages and by the retail method on the first-in, first-out basis for retail goods. Inventories consisted of the following:

	December 31,
	2003		2002
Food and beverage	$	32,458,803	$	29,124,594
Retail goods		15,313,495		11,754,781
	$	47,772,298	$	40,879,375

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major renewals and betterments are capitalized while maintenance and repairs are expensed as incurred.

The Company computes depreciation using the straight-line method. The estimated lives used in computing depreciation are generally as follows: buildings and improvements—5 to 40 years; furniture, fixtures and equipment—5 to 15 years; and leasehold improvements—shorter of 30 years or lease term, including extensions where appropriate.

38

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest is capitalized in connection with restaurant construction and development activities, and other real estate development projects. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. During 2003, 2002 and 2001, the Company capitalized interest costs of approximately $2,050,000, $1,959,000 and $2,437,000, respectively.

Restaurant and other properties are reviewed for impairment on a property by property basis whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of properties that are to be held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying amount of the asset. If such assets are considered to be impaired, an impairment charge is recorded in the amount by which the carrying amount of the assets exceeds their fair value. Properties to be disposed of are reported at the lower of their carrying amount or fair value, reduced for estimated disposal costs, and are included in other current assets.

Pre-Opening Costs

Pre-opening costs are expensed as incurred and include the direct and incremental costs incurred in connection with the commencement of each restaurant’s operations, which are substantially comprised of training-related costs.

Development Costs

Certain direct costs are capitalized in conjunction with site selection for planned future restaurants, acquiring restaurant properties and other real estate development projects. Direct and certain related indirect costs of the construction department, including interest, are capitalized in conjunction with construction and development projects. These costs are included in property and equipment in the accompanying consolidated balance sheets and are amortized over the life of the related building and leasehold interest. Costs related to abandoned site selections, projects, and general site selection costs which cannot be identified with specific restaurants are charged to operations.

Advertising

Advertising costs are expensed as incurred during such year. Advertising expenses were $34 million, $32 million and $22 million in 2003, 2002 and 2001, respectively.

Goodwill

Goodwill is not amortized, but instead tested for impairment at least annually. Other intangible assets are amortized over the life of the related agreement. These amounts are included in goodwill and other assets in the accompanying consolidated balance sheets, respectively.

Financial Instruments

The Company utilizes interest rate swap agreements to manage its exposure to interest rate risk. The Company’s interest rate swap agreements qualify as fair value hedges. As such, the gains or losses on the swaps are offset by corresponding gains or losses on the related debt.

Earnings Per Share and Stock Option Accounting

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share reflects the potential dilution that could

39

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

occur if contracts to issue common stock were exercised or converted into common stock. For purposes of this calculation, outstanding stock options are considered common stock equivalents using the treasury stock method, and are the only such equivalents outstanding.

The Company follows the intrinsic value method of accounting for stock options, and as such does not record compensation expense related to amounts outstanding.

Cash Flow Reporting

For purposes of the consolidated financial statements, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Segment Reporting

As of December 31, 2003, the Company operated 286 casual full-service dining restaurants which are a part of a single operating segment. The restaurants operate principally in the United States and provide similar products to similar customers. The restaurants generally possess similar pricing structures resulting in the potential for similar long-term expected financial performance characteristics. Revenues are from the sale of food, beverages and complementary retail items.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates and services.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities” in January 2003. This interpretation provides guidance on the identification of, and financial reporting for, variable interest entities. Variable interest entities are entities that lack the characteristics of a controlling financial interest or lack sufficient equity to finance its activities without additional subordinated financial support. FIN 46 requires a company to consolidate a variable interest entity if that company is obligated to absorb the majority of the entity’s expected losses or entitled to receive the majority of the entity’s residual returns, or both. The Company does not believe that FIN 46 will have a material impact on the Company’s consolidated financial statements.

2.  ACQUISITIONS

In February 2002, the Company acquired C.A. Muer, Inc., the owner and operator of 15 seafood restaurants (“Muer Acquisition”), in a stock purchase transaction for approximately $28.5 million. In August 2002, the Company acquired, in an asset purchase transaction, 27 Chart House seafood restaurants located primarily on the East and West Coasts of the United States from Angelo and Maxie’s, Inc. for approximately $45.5 million, as well as assumption of selected trade payable related liabilities. Both of these acquisitions included plans for the redevelopment of 10 additional lower profitability restaurants, also then acquired, into Joe’s Crab Shack restaurants, as well as the sale or disposal of six acquired but non-strategic locations. In October 2002, the

40

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company acquired 27 Saltgrass Steak House restaurants in a stock purchase transaction for approximately $73.0 million which included a $20 million promissory note issued to the seller. The Saltgrass acquisition provides for future contingent payments based on the financial performance of the acquired restaurants and a limited number of future restaurants. As such contingency payments have not been earned, no amounts have been accrued. Any related incentive payment is expected to require financial performance of the acquired business to be well in excess of historical financial performance. The acquisitions noted above are accounted for under SFAS 141 and results of operations are included in the accompanying financial statements from the date of acquisition. The assets acquired and liabilities assumed of the acquired businesses were recorded at estimated fair values using relevant comparables, appraisals, and records.

A summary of the assets acquired and liabilities assumed in the acquisitions follows (in 000’s):

	Muer			Chart House			Saltgrass
Estimated fair value of assets acquired	$	45,431		$	57,385		$	83,524
Liabilities assumed		(16,883	)		(5,945	)		(10,063	)
Allocated purchase price		28,548			51,440			73,461
Less cash acquired and seller note		(895	)		(163	)		(21,200	)
Net cash paid	$	27,653		$	51,277		$	52,261

As a result of the acquisitions, the Company has recorded acquisition integration costs for the estimated incremental costs to exit and consolidate activities at various locations, to involuntarily terminate employees, and for other costs to integrate operating locations and other activities of the acquired business with the Company. Accounting principles generally accepted in the United States provide that these acquisition integration expenses, which are not associated with the generation of future revenues and have no future economic benefit, be reflected as assumed liabilities in the allocation of the purchase price. Acquisition integration for the 2002 acquisitions aggregated $6.9 million of which most liabilities were paid in 2002.

During 2003, the Company made several individual property acquisitions that aggregated $27 million, plus $11.4 million of assumed debt, and included $5.1 million of Goodwill additions.

3.  PROPERTY AND EQUIPMENT AND OTHER ASSETS

Property and equipment is comprised of the following:

	December 31,
	2003			2002
Land	$	170,163,593		$	138,379,047
Buildings and improvements		222,903,558			195,445,593
Furniture, fixtures and equipment		234,372,485			179,119,008
Leasehold improvements		498,030,942			398,384,738
Construction in progress		64,349,939			86,968,286
		1,189,820,517			998,296,672
Less—accumulated depreciation		(224,245,526	)		(167,366,541	)
Property and equipment, net	$	965,574,991		$	830,930,131

41

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company continually evaluates unfavorable cash flows, if any, related to underperforming restaurants. Periodically it is concluded that certain properties have become impaired based on the existing and anticipated future economic outlook for such properties in their respective market areas. As a result, the Company recorded asset impairment depreciation charges of approximately $13,200,000, $2,200,000, and $2,394,000 in 2003, 2002 and 2001, respectively, representing the difference between the estimated fair value and carrying value for those restaurant properties. The asset impairment charge is classified as depreciation and amortization expense in the consolidated statements of income. Estimated fair values of impaired properties are based on comparable valuations, cash flows and management judgement.

Other current assets are comprised of the following:

	December 31,
	2003		2002
Prepaid expenses	$	3,490,137	$	4,439,300
Assets held for sale (expected to be sold within one year)		3,384,925		3,585,925
Marketable securities		—		2,752,979
Deposits		615,321		995,812
	$	7,490,383	$	11,774,016

Other expense (income) for 2003 is primarily expenses related to abandoned development projects. Other income during 2002 includes additional income of $1,100,000 from a settlement from a vendor and $875,000 in unrealized gains on marketable securities classified as trading offset by a loss of $1,500,000 on marketable securities and other assets held for sale.

4.  ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:

	December 31,
	2003		2002
Payroll and related costs	$	15,533,279	$	14,708,991
Rent, insurance and taxes, other than payroll and income taxes		37,028,881		36,628,732
Deferred revenue (gift certificates)		10,455,869		9,085,304
Other		11,494,612		13,814,543
	$	74,512,641	$	74,237,570

5.   DEBT

On October 1, 2003, the Company issued notes totaling $150.0 million through a private placement of debt (the “Senior Notes”). Proceeds from the Senior Notes were used to pay down amounts outstanding under the bank promissory notes and the bank syndicate credit facility. The debt offering consisted of four equal series of notes in the amount of $37.5 million, quarterly interest of 5.47%, 5.84%, 6.05% and 6.44%, with an average rate of 5.95%, and maturities on October 1, 2009, 2010, 2011 and 2013.

In connection with the Senior Notes, the Company entered into two interest swap agreements with the objective of reducing its exposure to interest rate risk and lowering interest expense. The agreements were

42

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

effective beginning October 7, 2003 with maturity dates of six years and seven years for an aggregate notional amount of $75 million and interest at LIBOR plus 1.71%. The Company’s interest rate swap agreements qualify as fair value hedges and meet the criteria for the “short cut method” under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

On October 14, 2003, the Company entered into the Second Amended and Restated Credit Agreement (the “Bank Credit Facility”) whereby the existing bank credit facility was amended and extended to a four-year $200.0 million revolving credit facility. The Bank Credit Facility provides the ability to add an additional $25.0 million of capacity within the facility and other permitted indebtedness. Interest on the Bank Credit Facility is payable monthly or quarterly at LIBOR or the bank’s base rate plus a financing spread. The Company’s financing spread is presently 1.875% for LIBOR, and 0.375% for base rate borrowings, and may be decreased or increased by 25 basis points as the Company’s leverage ratio decreases or increases over predetermined ratios. The Bank Credit Facility and Senior Notes are secured by stock of subsidiaries, governed by certain financial covenants, including maximum leverage ratio, maximum indebtedness, net worth, and fixed charge coverage ratio tests. The Bank Credit Facility additionally provides for limitations on annual capital expenditures to prescribed amounts, maximum annual cash dividends and limitations on repurchases of common stock. As of December 31, 2003, the Company had $10,000,000 in trade letters of credit. As of January 30, 2004, the Company had approximately $38 million available under the existing credit facilities for expansion and working capital purposes.

In connection with the Saltgrass Steak House acquisition in October 2002, the Company financed a portion of the acquisition with a $20 million, 7 year, 5.5% note to the former owner of Saltgrass Steak House. Principal payments under the promissory note aggregate $1,654,000 in 2004, $1,747,000 in 2005, $1,845,000 in 2006, $1,949,000 in 2007, $2,058,000 in 2008 and $8,802,000 thereafter (through 2009).

The Company assumed an $11.4 million, 9.39% non-recourse, long-term mortgage note payable, due May 2010, in connection with an asset purchase in March 2003. Principal and interest payments aggregate $102,000 monthly.

Long-term debt is comprised of the following:

	December 31,
	2003			2002
$200.0 million Bank syndicate credit facility, LIBOR + 1.875%, interest only, due October 2007	$	122,000,000		$	—
$150.0 million Senior Notes, average 5.95%, interest only, maturities ranging from October 2009 to October 2013		150,000,000			—
$20.0 million seller note, 5.5% interest, quarterly principal and interest payments of $653,386, due 2009		18,055,321			19,621,614
$220.0 million Bank syndicate credit facility, LIBOR + 2.5%, interest only, due July 2004		—			171,000,000
Non-recourse long-term note payable, 9.39% interest, principal and interest aggregate $101,762 monthly, due May 2010		11,318,664			—
Other long-term notes payable with various interest rates, principal and interest paid monthly		325,110			565,412
Total Debt		301,699,095			191,187,026
Less current portion		(1,963,189	)		(1,783,427	)
Long-term portion	$	299,735,906		$	189,403,599

43

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest expense (income), net includes the following:

	Year Ended December 31,
	2003			2002			2001
Interest expense	$	9,634,872		$	5,133,219		$	9,685,201
Interest income		(73,390	)		(136,197	)		(282,850	)
	$	9,561,482		$	4,997,022		$	9,402,351

6.  INCOME TAXES

An analysis of the provision for income taxes for the years ended December 31, 2003, 2002, and 2001 is as follows:

	2003		2002		2001
Tax Provision:
Current income taxes	$	267,491	$	9,939,230	$	3,266,954
Deferred income taxes		11,224,287		8,715,408		8,828,776
Total provision	$	11,491,778	$	18,654,638	$	12,095,730

The Company’s effective tax rate, for the years ended December 31, 2003, 2002, and 2001, differs from the federal statutory rate as follows:

	2003		2002		2001
Statutory rate	35.0	%	35.0	%	35.0	%
FICA tax credit	(9.1	)	(6.6	)	(7.3	)
State income tax, net of federal tax benefit	4.1		1.2		0.6
Recognition of tax carryforward assets and other tax attributes	(9.7	)	—		—
Other	(0.3	)	1.4		2.7
	20.0	%	31.0	%	31.0	%

The Company’s actual cash payments for annual income taxes due are currently lower than the financial accrual rate due to significant differences between book and tax accounting and tax credit and loss carryforwards.

Deferred income tax assets and liabilities as of December 31 are comprised of the following:

	2003			2002
Deferred Income Taxes:
Current assets—accruals and other	$	6,858,000		$	6,228,000
Non-current assets:
AMT credit, FICA credit carryforwards, and other	$	27,122,000		$	21,128,000
Net operating loss carryforwards		28,951,000			28,633,000
Valuation allowance for carryforwards		(26,236,000	)		(28,239,000	)
Non-current deferred tax asset		29,837,000			21,522,000
Non-current liabilities—property and other		(53,232,000	)		(33,063,000	)
Net non-current tax asset (liability)	$	(23,395,000	)	$	(11,541,000	)
Total net deferred tax asset (liability)	$	(16,537,000	)	$	(5,313,000	)

44

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At December 31, 2003 and 2002, the Company had operating loss carryovers for Federal Income Tax purposes of $77.0 million and $73.3 million respectively, which expire in 2009 through 2023. These operating loss carryovers, and certain other deductible temporary differences, are related to the acquisitions of Rainforest Cafe and Saltgrass Steak House, and their utilization is subject to an annual limitation. Because of this limitation, the Company established a valuation allowance to the extent it is more likely than not that these tax benefits will not be realized. In 2003, a reduction of the valuation allowance and deferred tax liabilities aggregating $6.3 million was recorded attributable to tax benefits deemed realizable and reduced accruals.

The Company has general business tax credit carryovers and minimum tax credit carryovers of $21.3 million and $7.4 million, respectively. The general business tax credit carryover includes $1.5 million from Saltgrass which is fully reserved, and the minimum tax credit carryover includes $2.4 million from Rainforest which is fully reserved. The general business credit carryovers expire in 2009 through 2023 while the minimum tax credit carryovers have no expiration date. The use of these credits is limited if the Company is subject to the alternative minimum tax. The Company believes it is more likely than not that it will generate sufficient income in future years to utilize the non-reserved credits.

The Internal Revenue Service (IRS) has examined the Company’s Federal Income Tax Returns and certain pre-acquisition returns for Rainforest Cafe for years 1997 through 2000. The fieldwork for the examination was completed without adjustment.

7.  COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company has entered into lease commitments for restaurant facilities as well as certain fixtures, equipment and leasehold improvements. Under most of the facility lease agreements, the Company pays taxes, insurance and maintenance costs in addition to the rent payments. Certain facility leases also provide for additional contingent rentals based on a percentage of sales in excess of a minimum amount. Rental expense under operating leases was approximately $54.1 million, $42.9 million and $40.6 million, during the years ended December 31, 2003, 2002, and 2001, respectively. Percentage rent included in rent expense was $12.1 million, $10.1 million, and $10.3 million, for 2003, 2002 and 2001, respectively.

In 2001, the Company entered into a $15.3 million equipment operating lease agreement. The lease expires in 2011. The Company guarantees a minimum residual value related to the equipment of approximately 66% of the total amount funded under the agreement. The Company may purchase the leased equipment throughout the lease term for an amount equal to the unamortized lease balance. The Company believes that the equipment’s fair value is sufficient that no amounts will be due under the residual value guarantee.

In 2002, the Company entered into a $6.9 million equipment operating lease agreement. The lease expires in 2012. The Company guarantees a minimum residual value related to the equipment of approximately 66% of the total amount funded under the agreement. The Company may purchase the leased equipment throughout the lease term for an amount equal to the unamortized lease balance. The Company believes that the equipment’s fair value is sufficient that no amounts will be due under the residual value guarantee.

In connection with substantially all of the Rainforest Cafe leases, amounts are provided for tenant inducements, rent abatements, and scheduled increases in rent. Such amounts are recorded as other long-term liabilities on the Company’s consolidated balance sheet, and amortized or accrued as an adjustment to rent expense, included in other restaurant operating expenses, on a straight-line basis over the lease term.

45

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The aggregate amounts of minimum operating lease commitments maturing in each of the five years and thereafter subsequent to December 31, 2003, are as follows:

2004	$	44,927,000
2005		44,368,000
2006		41,100,000
2007		38,438,000
2008		33,600,000
Thereafter		279,319,000
Total minimum rentals	$	481,752,000

Building Commitments

As of December 31, 2003, the Company had future development, land purchases and construction commitments expected to be expended within the next twelve months of approximately $17.2 million, including completion of construction on certain new restaurants. In 2001, the Company entered into an agreement to construct and operate a convention center in the City of Galveston, Texas. The Galveston convention center construction costs will be funded by governmental agency bonds issued by the City of Galveston and serviced by certain hotel occupancy taxes. In connection with the convention center development and related management contract, the Company is to guarantee certain construction cost overruns and operating losses, if any, subject to certain rights of reimbursement. Under the agreements, the Company will have the rights to one-half of any profits generated by the operation of the convention center.

In 2003, the Company purchased from the City of Galveston the Flagship Hotel and Pier, subject to an existing lease. Under this agreement, upon termination of the existing lease, the Company has committed to spend an additional $15 million to transform the hotel and pier into a 19^th century style Inn and entertainment complex complete with rides and carnival type games. The property is currently occupied by a tenant.

During November 2003, the Company purchased two casual Italian restaurants. Under the purchase agreement, the Company is committed to building an additional five casual Italian restaurants over the next 5 years, or make certain payments in lieu of development. In conjunction with the agreement to develop additional restaurants, the seller agrees to provide consulting services to ensure the consistency and the quality of the food and service are maintained through this transition period. The Company also has a commitment to build an additional 12 new Saltgrass restaurants within five years. To date, five restaurants have either opened or are under construction.

Loan Guarantee

Rainforest Cafe, a wholly-owned subsidiary of the Company, has guaranteed the borrowings of one of its foreign affiliates in which the Company owns a 20% interest. As a result of a settlement with the foreign affiliate during 2003, we remain subject to a pre-existing obligation as guarantor of the affiliate’s loan up to $1,400,000. However, Rainforest Cafe’s proportional share of the remaining outstanding loan balance is approximately $300,000.

Litigation and Claims

In January 2002, Rainforest Cafe, Inc., our wholly-owned subsidiary, was sued by EklecCo, L.L.C., in the Supreme Court of the State of New York in Onondaga County. EklecCo is seeking damages and costs as a result

46

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of Rainforest Cafe’s alleged breach of a restaurant lease entered into in 1996 for a Rainforest Cafe unit formerly located in the Palisades Mall. Rainforest Cafe believes that it has no liability for damages beyond the personal property located in the premises at the time it vacated the premises. Rainforest Cafe is defending this case vigorously. Because the case is in its early stages, the financial impact to the Company, if any, cannot be predicted.

On July 31, 2002, and subsequently amended, a purported collective action lawsuit against the Company entitled Meaghan Bollenberg, et. al. v. Landry’s Restaurants, Inc. was filed in the United States District Court for the Northern District of Illinois and subsequently moved to a Court in the Southern District of Texas. The lawsuit was filed by six plaintiffs who were servers on behalf of themselves and others similarly situated. The lawsuit alleges that the Company violated certain minimum wage laws under the federal Fair Labor Standards Act and seeks damages and costs. The Company is vigorously defending this litigation. Because the case is in its early stages, the financial impact to the Company, if any, cannot be predicted.

Former shareholders of approximately 4.4 million shares of Rainforest Cafe, Inc. dissented to the merger between the Company and Rainforest Cafe, seeking an amount in excess of the $3.25 per share paid in the merger. An appraisal proceeding was held before a Minnesota District Court Judge in early January 2003. The appraisal trial ended with a ruling in the Company’s favor. In July 2003, the ruling was appealed by the dissenters. The appeal hearing was held and a ruling is expected by April 2004.

General Litigation

The Company is subject to other legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the outcome of any of these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

8.  STOCKHOLDERS’ EQUITY

In April 2002, the Company completed a public offering of 5,297,500 shares of the Company’s common stock. Net proceeds of the offering to the Company were approximately $132.6 million and were used to repay outstanding borrowings.

In October 2002, the Company’s board of directors authorized a $50.0 million open market stock buy back program. In September 2003, the Company authorized an additional open market stock repurchase program for $60.0 million.

In connection with the Company’s stock buy back programs, the Company repurchased into treasury approximately 469,000, 305,000 and 3,500 shares of common stock for approximately $8.4 million, $6.7 million and $0.1 million, in 2003, 2002, and 2001, respectively.

Commencing in 2000, the Company began to pay an annual $0.10 per share dividend, declared and paid in quarterly installments of $0.025 per share.

47

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A reconciliation of the amounts used to compute net income per common share—diluted is as follows:

	Year Ended December 31,
	2003		2002		2001
Net Income	$	45,901,054	$	41,521,616	$	26,919,569
Weighted average common shares outstanding		27,600,000		25,900,000		21,750,000
Dilutive common stock equivalents—stock options		725,000		1,000,000		785,000
Weighted average common and common equivalent shares outstanding—diluted		28,325,000		26,900,000		22,535,000
Net income per share—diluted	$	1.62	$	1.54	$	1.19

Options to purchase approximately 200,000 shares in 2001 have been excluded from the calculation of diluted earnings per share as they were anti-dilutive.

The Company maintains two stock option plans, which were originally adopted in 1993, (the Stock Option Plans), as amended, pursuant to which options may be granted to eligible employees and non-employee directors of the Company or its subsidiaries for the purchase of an aggregate of 2,750,000 shares of common stock of the Company. The Stock Option Plans are administered by the Stock Option Committee of the Board of Directors (the Committee), which determines at its discretion, the number of shares subject to each option granted and the related purchase price, vesting and option periods. The Committee may grant either non-qualified stock options or incentive stock options, as defined by the Internal Revenue Code of 1986, as amended.

The Company also maintains the 1995 Flexible Incentive Plan, which was adopted in 1995, (Flex Plan), as amended, for key employees of the Company. Under the Flex Plan eligible employees may receive stock options, stock appreciation rights, restricted stock, performance awards, performance stock and other awards, as defined by the Board of Directors or an appointed committee. The aggregate number of shares of common stock which may be issued under the Flex Plan (or with respect to which awards may be granted) may not exceed 2,000,000 shares.

In June 2003, the Company established an equity incentive plan pursuant to which stock options or restricted stock of the Company may be granted to eligible employees of the Company for an aggregate of 700,000 shares of common stock of the Company. The Compensation Committee of the Board of Directors determines the number of shares, prices, and vesting schedule of individual grants. In addition, the Company will issue pursuant to an employment agreement, over its five year term, 500,000 shares of restricted stock, with a 10 year vest from grant date, and a minimum of 800,000 stock options. In August 2003, 100,000 restricted common shares were issued subject to vesting on the tenth anniversary. The unamortized balance of non-vested restricted common stock grants is reflected as deferred compensation included in stockholders’ equity and the related expense is amortized over the vesting periods.

In March 2003, the Company established the 2002 Employee/Rainforest Conversion Plan pursuant to which stock options of the Company may be granted to employees, non-employee directors and consultants of the Company for up to an aggregate of 2,162,500 shares of Common Stock of the Company. The Compensation Committee of the Board of Directors determines the number of shares, prices and vesting schedule of individual grants.

48

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The table below illustrates the effect on net income and earnings per share if compensation costs for the Company had been determined using the alternative accounting method based on the fair value prescribed by SFAS No. 123.

	2003			2002			2001
Net income, as reported		45,900,000		$	41,500,000		$	26,900,000
Less: stock based compensation expense using fair value method, net of tax		(2,100,000	)		(1,800,000	)		(1,500,000	)
Pro forma net income	$	43,800,000		$	39,700,000		$	25,400,000
Earnings per share
Basic, as reported	$	1.66		$	1.60		$	1.24
Basic, pro forma	$	1.59		$	1.53		$	1.17
Diluted, as reported	$	1.62		$	1.54		$	1.19
Diluted, pro forma	$	1.55		$	1.48		$	1.13

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model; amortization over the respective vesting periods; expected lives of 6 years; expected stock price volatility of approximately 40% and an interest rate of approximately 6% in 2001, and 2.9% in 2002. The weighted average fair value per share of options granted during 2002 and 2001 was $7.83, and $5.82, respectively. Options for 16,000 shares were granted in 2003 and were not deemed material for the above calculations.

In connection with the acquisition of Rainforest Cafe, the Company issued approximately 500,000 vested stock options to employees of Rainforest Cafe as replacement for existing options outstanding at the date of the merger, as required by the merger agreement. The fair value of these options was included in the purchase price of Rainforest Cafe.

At December 31, 2003, options for 2,410,874 shares were outstanding at prices ranging from $6.00 to $20.60 per share. As of December 31, 2003 all options have been granted at the stock price on the grant date and are generally exercisable beginning one year from the date of grant with annual vesting periods over three to five years.

	2003				2002				2001
	Shares		Average Exercise Price		Shares		Average Exercise Price		Shares		Average Exercise Price
Options outstanding, beginning of year	2,694,470		$	11.57	3,040,926		$	9.93	3,169,803		$	9.92
Granted	16,000		$	20.26	464,135		$	17.71	623,500		$	9.83
Exercised	(251,196	)	$	7.28	(782,514	)	$	9.12	(501,523	)	$	7.05
Terminated	(48,400	)	$	14.36	(28,077	)	$	13.55	(250,854	)	$	10.67
Options outstanding, end of year	2,410,874		$	11.97	2,694,470		$	11.57	3,040,926		$	9.93
Options exercisable, end of year	1,902,274		$	11.82	1,726,368		$	10.33	1,831,694		$	10.99

49

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table provides certain information with respect to stock options outstanding as of December 31, 2003:

Range of Exercise Prices	Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Life Outstanding
< $9.00	994,360	$	7.59	6.3
$9.00 - $13.50	783,627	$	12.84	3.4
$13.50 - $20.25	622,887	$	17.73	8.0
> $20.25	10,000	$	20.60	9.8
	2,410,874	$	11.97	5.8

The following table provides certain information with respect to stock options exercisable at December 31, 2003:

Range of Exercise Prices	Stock Options Exercisable	Weighted Average Exercise Price
< $9.00	737,260	$	7.45
$9.00 - $13.50	778,627	$	12.84
$13.50 - $20.25	386,387	$	18.24
	1,902,274	$	11.82

9.   CERTAIN TRANSACTIONS

In 1996, the Company entered into a Consulting Service Agreement (the “Agreement”) with Fertitta Hospitality, LLC (“Fertitta Hospitality”), which is jointly owned by the Chairman and Chief Executive Officer of the Company and his wife. Pursuant to the Agreement, the Company provided to Fertitta Hospitality management and administrative services. In 2003, a new agreement was signed (“Management Agreement”). Under the Agreement, the Company received a fee of $2,500 per month plus the reimbursement of all out-of-pocket expenses and such additional compensation as agreed upon. Pursuant to the Management Agreement, the Company receives a monthly fee of $7,500 plus reimbursement of expenses. The Management Agreement provides for a renewable three-year term.

In 1999, the Company entered into a ground lease with 610 Loop Venture, LLC, a company wholly owned by the Chairman and Chief Executive Officer of the Company, on land owned by the Company adjacent to the Company’s corporate headquarters. Under the terms of the ground lease, 610 Loop Venture pays the Company base rent of $12,000 per month plus pro-rata real property taxes and insurance. 610 Loop Venture also has the option to purchase certain property based upon a contractual agreement.

In 2002, the Company entered into an $8,000 per month, 20 year, with option renewals, ground lease agreement with Fertitta Hospitality for a new Rainforest Cafe on prime waterfront land in Galveston, Texas. The annual rent is equal to the greater of the base rent or percentage rent up to six percent, plus taxes and insurance. In 2003, the Company paid base and percentage rent aggregating $602,000.

As permitted by the employment contract between the Company and the Chief Executive Officer, charitable contributions were made by the Company to a charitable Foundation that the Chief Executive Officer served as Trustee in the amount of $170,000 and $197,720 in 2003 and 2002, respectively. The contribution was made in addition to the normal salary and bonus permitted under the employment contract.

50

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company, on a routine basis, holds or hosts promotional events, training seminars and conferences for its personnel. In connection therewith, the Company incurred in 2003 and 2002 expenses in the amount of $138,000 and $229,746, respectively, at resort hotel properties owned by the Company’s Chief Executive Officer and managed by the Company.

The Company and Fertitta Hospitality jointly sponsored events and promotional activities in 2003 and 2002 which resulted in shared costs and use of Company personnel or Fertitta Hospitality employees and assets.

The foregoing agreements were entered into between related parties and were not the result of arm’s-length negotiations. Accordingly, the terms of the transactions may have been more or less favorable to the Company than might have been obtained from unaffiliated third parties.

10.  QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly consolidated results of operations (in thousands, except per share data).

	March 31, 2003		June 30, 2003		September 30, 2003		December 31, 2003
Quarter Ended:
Revenues	$	249,582	$	299,890	$	302,162	$	254,121
Cost of Revenues	$	73,322	$	87,447	$	88,168	$	72,846
Operating income	$	13,979	$	27,150	$	29,546	$	(2,258	)
Net income	$	8,121	$	16,906	$	18,382	$	2,492
Net income per share (basic)	$	0.29	$	0.61	$	0.67	$	0.09
Net income per share (diluted)	$	0.29	$	0.60	$	0.65	$	0.09

	March 31, 2002		June 30, 2002		September 30, 2002		December 31, 2002
Quarter Ended:
Revenues	$	192,170	$	231,938	$	241,072	$	229,615
Cost of Revenues	$	55,401	$	66,443	$	68,995	$	67,106
Operating income	$	10,888	$	21,115	$	23,354	$	8,930
Net income	$	6,183	$	15,045	$	15,717	$	4,577
Net income per share (basic)	$	0.28	$	0.58	$	0.57	$	0.17
Net income per share (diluted)	$	0.27	$	0.56	$	0.55	$	0.16

51

LANDRY’S RESTAURANTS, INC.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized in the City of Houston, State of Texas, on the 9th day of March, 2004.

LANDRY’S RESTAURANTS, INC.

/s/    Tilman J. Fertitta

Tilman J. Fertitta

Chairman of the Board, President and

Chief Executive Officer

Each person whose signature appears below constitutes and appoints Tilman J. Fertitta, Paul S. West and Steven L. Scheinthal, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign on his behalf individually and in each capacity stated below any amendment to this Annual Report on Form 10-K and any amendment thereto and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrants and in the capacities and on the dates indicated.

Name	Title	Date
/s/    Tilman J. Fertitta         Tilman J. Fertitta	Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)	March 9, 2004
/s/    Paul S. West         Paul S. West	Executive Vice President, Chief Financial Officer and Director (Principal Financial Officer)	March 9, 2004
/s/    Steven L. Scheinthal         Steven L. Scheinthal	Executive Vice President, Secretary, General Counsel and Director	March 9, 2004
/s/    Michael S. Chadwick         Michael S. Chadwick	Director	March 9, 2004
/s/    Michael Richmond         Michael Richmond	Director	March 9, 2004
/s/    Joe Max Taylor         Joe Max Taylor	Director	March 9, 2004

52

EXHIBIT INDEX

Certain of the exhibits to this report on Form 10-K are hereby incorporated by reference to the Company’s Registration Statement on Form S-1 No. 33-65498 and all amendments thereto (“A”) and the Company’s Form 10-Q for the quarterly period ended June 30, 1995 (“B”), May 9, 1995 Proxy Statement (“C”), the June 25, 1997 Form 8-K (“D”), the 1995 Form 10-K (“E”), the May 1996 Form S-4 (“F”), the Form 10-Q for the quarterly period ended September 30, 1999 (“G”), the March 9, 1999 Form 8-K (“H”), the July 13, 2000 Form 8-K (“I”), the September 29, 2000 Schedule TO (“J”), and the Form 10-Q for the quarterly period ended September 30, 2000 (“K”), the 2001 Form 10-K (“L”), the Form 10-Q for the quarterly period ended September 30, 2002 (“M”), the Form 10-Q for the quarterly period ended June 30, 2003 (“N”), the Form 10-Q for the quarterly period ended September 30, 2003 (“O”), and the October 9, 2003 Form 8-K (“P”), the Company’s Registration Statement on Form S-8 No. 333-104175 and all Amendments thereto (“Q”). Such exhibits are denoted with the letter. Exhibits denoted by * are filed herewith.

Exhibit No.	Exhibit
3.1	Certificate of Incorporation of Landry’s Seafood Restaurants, Inc. as filed with the Delaware Secretary of State on June 23, 1993, as amended—A—(See Exhibit 3.1) and—B-
3.2	Amendment to Certificate of Incorporation—A-
3.3	Bylaws of Landry’s Restaurants, Inc.—A- (See Exhibit 3.2)
*4	Specimen Common Stock Certificate, $.01 par value, of Landry’s Restaurants, Inc.—
10.1	1993 Stock Option Plan (“Plan”)—A-
10.2	Form of Incentive Stock Option Agreement under the Plan—A- (See Exhibit 10.61)
10.3	Form of Non-Qualified Stock Option Agreement under the Plan -A- (See Exhibit 10.62)
10.4	Non-Qualified Formula Stock Option Plan for Non-Employee Directors (“Directors’ Plan”)—A-
10.5	First Amendment to Non-Qualified Formula Stock Option Plan for Non-Employee Directors—C-
10.6	Form of Stock Option Agreement for Directors’ Plan—A- (See Exhibit 10.64)
10.8	1995 Flexible Incentive Plan—C-
*10.9	2003 Equity Incentive Plan
10.10	Form of Stock Option Agreement between Landry’s Seafood Restaurants, Inc. and Tilman J. Fertitta—E-
10.11	Contract of Sale and Development Agreement—G-
10.12	Form of Consulting Services Agreement between Landry’s Management, L.P. and Fertitta Hospitality—E-
10.16	Agreement and Plan of Merger, dated September 26, 2000, by and among Landry’s Seafood Restaurants, Inc., LSR Acquisition Corp. and Rainforest Cafe, Inc. and related agreements—J-
10.18	Asset Purchase Agreement by and among Chart House, Inc., Chart House Enterprises, Inc., LCH Acquisitions, Inc. and Landry’s Restaurants, Inc.—M-

53

10.20	Stock Purchase Agreement dated September 10, 2002 among Landry’s Restaurants, Inc., LSRI Holdings, Inc. and Well Seasoned, Inc., MetroNational Corporation and Kimberly Restaurants, Ltd.—M-
10.21	Asset Purchase and Sale Agreement dated September 10, 2002 among Kimberly Restaurants, Ltd., MNC Restaurant Properties, L.P., Well Seasoned, Inc. and MetroNational Corporation and LSRI Holdings, Inc.—M-
10.22	Second Amended and Restated Credit Agreement dated as of October 14, 2003, by and among Landry’s, Bank of America, N.A. and the other financial institutions party thereto—O-
10.23	$150 Million Senior Notes Master Shelf Agreement—P-
10.24	Employment Agreement—N-
10.25	Landry’s Restaurants, Inc. 2002 Employee/Rainforest Conversion Plan.—Q-
10.26	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 1—Q-
10.27	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 2—Q-
10.28	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 3—Q-
10.29	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 4—Q-
10.30	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 1—Q-
10.31	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 2—Q-
10.32	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 3—Q-
10.33	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 4—Q-
*10.34	Form of Management Agreement between Landry’s Management, L.P. and Fertitta Hospitality
*14	Code of Ethics
*21	Subsidiaries of Landry’s Restaurants, Inc.
*23.1	Consent of Ernst & Young LLP
*31.1	Certification
*31.2	Certification
*32	Certification

54

EX-4

                                   EXHIBIT 4

                              CERTIFICATE OF STOCK


        NUMBER                                              COMMON STOCK

     C                          [LANDRY'S LOGO]                SHARES

                                                       CUSIP 51508L 10 3
INCORPORATED UNDER THE LAWS                            SEE REVERSE FOR CERTAIN
OF THE STATE OF DELAWARE                               DEFINITIONS

                                                       PAR VALUE $.01 PER SHARE

                           LANDRY'S RESTAURANTS, INC.

This Certifies that








is the owner of




          FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF

        SPECIMEN                                        SPECIMEN

Landry's Restaurants, Inc. transferable on the books of the Corporation by the
holder hereof in person or by a duly authorized attorney upon surrender of the
certificate properly endorsed. This certificate is not valid until countersigned
by the Transfer Agent and registered by the Registrar.

     Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized Officers.

Dated:  12 503                                                 12 503


                        [LANDRY'S RESTAURANTS, INC. SEAL]

/s/ Tilman J. Fertitta                                /s/ Steven L. Scheinthal
      President                                                Secretary



                                [LANDRY'S LOGO]

                               RESTAURANTS, INC.

                           LANDRY'S RESTAURANTS, INC.


     THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS. SUCH REQUESTS MAY BE MADE TO THE SECRETARY OF THE CORPORATION AT
ITS PRINCIPAL PLACE OF BUSINESS.


     The following abbreviations, when used in the inscription on the face OF
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:


                                              
TEN COM -as tenants in common                   UNIF GIFT MIN ACT-............Custodian.................
TEN ENT -as tenants by the entireties                               (Cust)               (Minor)
JT TEN  -as joint tenants with right of                           under Uniform Gifts to Minors Act
         survivorship and not as tenants                          ......................................
         in common                                                            (State)

                      Additional abbreviations may also be used though not in the above list.

For Value Received____________________________________________________________________hereby sell, assign transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
  IDENTIFYING NUMBER OF ASSIGNEE

_______________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________
                  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

_______________________________________________________________________________________________________________________

_________________________________________________________________________________________________________________Shares
of Common Stock represented by the within certificate, and do hereby irrevocably constitute and appoint

_______________________________________________________________________________________________________________________

______________________________________________________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises


                                                       X ______________________________________________________________

NOTE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.

                                                       X ______________________________________________________________

                                                       ALL GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION (SUCH
                                                       AS A BANK OR BROKER) WHICH IS A PARTICIPANT IN THE SECURITIES
                                                       TRANSFER AGENTS MEDALLION PROGRAM ("STAMP"), THE NEW YORK
                                                       STOCK EXCHANGE, INC. MEDALLION SIGNATURE PROGRAM ("MSP"),
                                                       OR THE STOCK EXCHANGES MEDALLION PROGRAM ("SEMP") AND
                                                       MUST NOT BE DATED, GUARANTEES BY A NOTARY PUBLIC ARE NOT
                                                       ACCEPTABLE.

EX-10.9

Exhibit 10.9

Landry’s Restaurants, Inc. 2003 Equity Incentive Plan

The Landry’s Restaurants, Inc. 2003 Equity Incentive Plan (the “Plan”) was adopted by the Board of Directors of Landry’s Restaurants, Inc., a Delaware corporation (the “Company”), on June 23, 2003.

ARTICLE 1

PURPOSE

The purposes of the Plan are to foster and promote the long-term financial success of the Company and its Subsidiaries and materially increase the value of the Company and its Subsidiaries by (a) encouraging the long-term commitment of the Employees of the Company and its Subsidiaries, (b) motivating performance of the Employees of the Company and its Subsidiaries by means of long-term performance related incentives, (c) encouraging and providing Employees of the Company and its Subsidiaries with an opportunity to obtain an ownership interest in the Company, (d) attracting and retaining outstanding Employees by providing incentive compensation opportunities, and (e) enabling participation by Employees in the long-term growth and financial success of the Company and its Subsidiaries.

With respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the “1934 Act”). To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void ab initio, to the extent permitted by law and deemed advisable by the Committee.

ARTICLE 2

DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:

2.1    “Award” means the grant of any Restricted Stock, Incentive Stock Option, or Nonqualified Stock Option, with or without a CEV feature (referred to herein sometimes as an “Incentive”).

2.2    “Award Agreement” means a written agreement between a Participant and the Company which sets out the terms of the grant of an Award.

2.3    “Award Period” means the period set forth in the Award Agreement with respect to a Stock Option during which the Stock Option may be exercised, which shall commence on the Date of Grant and expire at the time set forth in the Award Agreement.

2.4    “Board” means the board of directors of the Company.

2.5    “CEV” or “Cash Equivalent Value” means the feature consisting of a payment in cash equal to the excess of the Fair Market Value of a specified number of shares of Common Stock on the date the Stock Option is exercised over the CEV Price for such shares.

2.6    “CEV Price” means the exercise price of each share of Common Stock covered by a CEV feature, determined on the Date of Grant of the Stock Option containing the CEV.

2.7    “Code” means the Internal Revenue Code of 1986, as amended.

2.8      “Committee” means the committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan.

2.9      “Common Stock” means the common stock, par value $0.01 per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan.

2.10    “Company” means Landry’s Restaurants, Inc., a Delaware corporation, and any successor entity.

2.11    “Corporation” means any entity that (i) is defined as a corporation under Code Section 7701 and (ii) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (ii) hereof, an entity shall be treated as a “corporation” if it satisfies the definition of a corporation under Section 7701 of the Code.

2.12    “Date of Grant” means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement.

2.13    “Employee” means common law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company.

2.14    “Fair Market Value” means, as of a particular date, (i) if the shares of Common Stock are listed on a national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (ii) if the shares of Common Stock are not so listed but are quoted on the Nasdaq National Market System, the closing sales price per share of Common Stock on the Nasdaq National Market System on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (iii) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation Bureau, Inc., or (iv) if none of the above is applicable, such amount as may be determined by the Board (acting on the advice of an Independent Third Party, should the Board elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock.

2.15    “Independent Third Party” means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Board may utilize one or more Independent Third Parties.

2.16    “Incentive Stock Option” means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan.

2.17    “Nonqualified Stock Option” means a nonqualified stock option, granted pursuant to this Plan, to which Section 421 of the Code does not apply.

2.18    “Option Price” means the price which must be paid by a Participant upon exercise of a Stock Option to purchase a share of Common Stock.

2.19    “Participant” means an Employee of the Company or a Subsidiary to whom an Award is granted under this Plan.

2.20    “Plan” means this Landry’s Restaurants, Inc. 2003 Equity Incentive Plan, as amended from time to time.

2.21    “Reporting Participant” means a Participant who is subject to the reporting requirements of Section 16 of the 1934 Act.

2.22    “Restricted Stock” means shares of Common Stock issued or transferred to a Participant pursuant to Section 6.5 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement.

2.23    “Stock Option” means a Nonqualified Stock Option or an Incentive Stock Option.

2.24    “Subsidiary” means (i) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner, and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (i) above or any limited partnership listed in item (ii) above. “Subsidiaries” means more than one of any such corporations, limited partnerships, partnerships or limited liability companies.

2.25    “Termination of Service” occurs when a Participant who is an Employee of the Company or any Subsidiary shall cease to serve as an Employee of the Company and its Subsidiaries, for any reason; provided, however, if any Termination of Service provided for herein shall fall on a Saturday, Sunday or legal holiday, then such date of Termination of Service shall be deemed to be the first normal business day of the Company, at its office in Houston, Texas, before such Saturday, Sunday or legal holiday. If, however, a Participant who is an Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Code section 422 upon ceasing to be an Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option.

2.26    “Total and Permanent Disability” means a Participant is qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease, or mental disorder which prevents the Participant from performing his or her duties of employment for a period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided that, with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code.

ARTICLE 3

ADMINISTRATION

Subject to the terms of this Article 3, the Plan shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “Committee”). The Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board. If the Compensation Committee of the Board is not responsible for administering the Plan, the Compensation

Committee shall have the right to exercise any of its responsibilities with respect to the Plan as set forth in its Charter.

If necessary to satisfy the requirements of Section 162(m) of the Code and/or Rule 16b-3 promulgated under the 1934 Act, membership on the Committee shall be limited to those members of the Board who are “outside directors” under Section 162(m) of the Code and/or “non-employee directors” as defined in Rule 16b-3 promulgated under the 1934 Act. The Committee shall select one of its members to act as its Chairman. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee.

The Committee shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement, where applicable, the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance requirements, as are approved by the Committee, but not inconsistent with the Plan (subject to the Compensation Committee of the Board’s responsibility to determine the Chief Executive Officer’s compensation). The Committee shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in tandem (that is, a joint grant where, under the terms of the Award Agreement, exercise of one Incentive results in cancellation of all or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, no member of the Committee shall participate in any decisions regarding any Award granted hereunder to such member. All decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board.

Notwithstanding the provisions of the preceding paragraph, the Board may, in its discretion and by a resolution adopted by the Board, authorize one or more officers of the Company (an “Authorized Officer”) to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan and (ii) determine the number of shares of Common Stock that will be subject to such Awards; provided, however, that the resolution of the Board granting such authority shall (x) specify the total number of shares of Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Awards, and (z) not authorize an officer to designate himself as a recipient of any Award. The Authorized Officer shall notify the Committee in writing of the persons designated to receive such Awards, the type of Award or the type of Incentives subject to the Award, the Date of Grant, the number of shares of Common Stock that will be subject to such Awards, and the purchase price to be paid for such shares. If authorized to do so in the Board’s written resolution, the Authorized Officer shall cause the Company to execute an Award Agreement with the Participant, subject to the Committee’s ratification of such terms of an Award as required by law.

Within an administratively reasonable time after receipt of the Authorized Officer’s written notice of one or more Awards, the Committee shall authorize or ratify the grant of such Awards and shall prescribe all other terms of such Awards pursuant to its authority set forth in the preceding paragraphs of this Article 3.

The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, (iii) establish performance goals for an Award and certify the extent of their achievement, and (iv) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. The Committee’s discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision of the Plan to the contrary.

The Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed to have been taken by the Committee.

With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the 1934 Act, the Sarbanes-Oxley Act of 2002, Section 422 of the Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any other applicable law, rule or restriction (collectively, “applicable law”), to the extent that any such restrictions are no longer required by applicable law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards. To the extent there are restrictions of applicable law that would affect the actions of the Committee or the composition of the Committee as otherwise provided for under the terms of the Plan, then notwithstanding the terms and provisions of the Plan, those restrictions of applicable law shall apply under the Plan as if those restrictions were fully set forth in the Plan.

ARTICLE 4

ELIGIBILITY

Any Employee (including an Employee who is also an officer) of the Company whose judgment, initiative, and efforts contributed or may be expected to contribute to the successful performance of the Company is eligible to participate in the Plan. The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee of the Company or any Subsidiary. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards granted at different times need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation determinations of which Employees are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by the Committee selectively among Participants who receive, or are eligible to receive, Awards under the Plan.

ARTICLE 5

SHARES SUBJECT TO PLAN

5.1    Number Available for Awards. Subject to adjustment as provided in Articles 11 and 12, the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is seven hundred thousand (700,000) shares. Shares to be issued shall be solely from Common Stock held by the Company in its treasury. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan.

5.2    Reuse of Shares. Subject to Section 5.2(c), if, and to the extent:

(a)    A Stock Option shall expire or terminate for any reason without having been exercised in full, or in the event that a Stock Option is exercised or settled in a manner such that some or all of the shares of Common Stock relating to the Stock Option are not issued to the Participant (or beneficiary) (including as the result of the use of shares for withholding taxes), the shares of Common Stock subject thereto which have not become outstanding shall (unless the Plan shall have sooner terminated) become available for issuance under the Plan; in addition, with respect to any share-for-share exercise or cashless exercise pursuant to Section 8.3 or otherwise, only the “net” shares issued shall be deemed to have become outstanding for purposes of the Plan as a result thereof. Notwithstanding the foregoing provisions of this paragraph (a), shares which

were not issued because they were used for withholding taxes are not available for issuance for purposes of granting Incentive Stock Options.

(b)    If shares of Restricted Stock under the Plan are forfeited for any reason, such shares of Restricted Stock shall (unless the Plan shall have sooner terminated) become available for issuance under the Plan; provided, however, that if any dividends paid with respect to shares of Restricted Stock were paid to the Participant prior to the forfeiture thereof, such shares shall not be reused for grants or awards.

ARTICLE 6

GRANT OF AWARDS

6.1    In General. The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years after the date of adoption of this Plan of, if later and so required, the date of stockholder approval for the Plan. If required by rules or regulations of the New York Stock Exchange or otherwise required by applicable law, or if desired by the Board, the Plan shall be submitted to the Company’s stockholders for approval; however, the Committee may grant Awards under the Plan prior to the time of any required or desired stockholder approval. Any such Award granted prior to such stockholder approval, if required or desired by the Board, shall be made subject to such stockholder approval. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan.

6.2    Stock Options. The grant of an Award of Stock Options shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth: (i) the Incentive being granted, (ii) the total number of shares of Common Stock subject to the Incentive(s), (iii) the Option Price, (iv) the Award Period, (v) the Date of Grant, and (vi) such other terms, provisions, limitations, and performance objectives, as are approved by the Committee, but not inconsistent with the Plan.

6.3    Option Price. The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any share of Common Stock may be equal to, less than, or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least 110% of the Fair Market Value of the Common Stock on the Date of Grant.

6.4    Maximum ISO Grants. The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive Stock Option stock by causing the issuance of a separate stock certificate and identifying such stock as Incentive Stock Option stock on the Company’s stock transfer records.

6.5    Restricted Stock. If Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option), the Committee shall set forth in the related Award Agreement: (i) the number of shares of Common Stock awarded, (ii) the price, if any, to be paid by the Participant for such Restricted Stock and the method of payment of the price, (iii) the time or times within which such Award may be subject to forfeiture, (iv) specified performance goals of the Company, a Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, which the Committee determines

must be met in order to remove any restrictions (including vesting) on such Award, and (v) all other terms, limitations, restrictions, and conditions of the Restricted Stock, which shall be consistent with this Plan. The provisions of Restricted Stock need not be the same with respect to each Participant. If the Committee establishes a purchase price for an Award of Restricted Stock, the Participant must accept such Award within a period of thirty (30) days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement and paying such purchase price.

(a)    Legend on Shares. Each Participant who is awarded or receives Restricted Stock shall be issued a stock certificate or certificates in respect of such shares of Common Stock. Such certificate(s) shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, substantially as provided in Section 15.9 of the Plan.

(b)    Restrictions and Conditions. Shares of Restricted Stock shall be subject to the following restrictions and conditions:

(i)    Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined by the Committee commencing on the Date of Grant or the date of exercise of an Award (the “Restriction Period”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Award, such action is appropriate.

(ii)    Except as provided in sub-paragraph (i) above or in the applicable Award Agreement, the Participant shall have, with respect to his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Certificates for shares of Common Stock free of restriction under this Plan shall be delivered to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares of Common Stock or after any other restrictions imposed in such shares of Common Stock by the applicable Award Agreement or other agreement have expired. Certificates for the shares of Common Stock forfeited under the provisions of the Plan and the applicable Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement shall require that each Participant, in connection with the issuance of a certificate for Restricted Stock, shall endorse such certificate in blank or execute a stock power in form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.

(iii)    The Restriction Period of Restricted Stock shall commence on the Date of Grant or the date of exercise of an Award, as specified in the Award Agreement, and, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the conditions set forth in the Award Agreement; such conditions may provide for vesting based on (i) length of continuous service, (ii) achievement of specific business objectives, (iii) increases in specified indices, (iv) attainment of specified growth rates, or (v) other comparable measurements of Company performance, as may be determined by the Committee in its sole discretion.

(iv)    Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award Agreement that either (i) the Company shall be obligated to, or (ii) the Company may, in its sole discretion, elect to, pay to the

Participant, as soon as practicable after the event causing forfeiture, in cash, an amount equal to the lesser of the total consideration paid by the Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service, as the Committee, in its sole discretion shall select. Upon any forfeiture, all rights of a Participant with respect to the forfeited shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company.

6.6    Maximum Individual Grants. No Participant may receive during any fiscal year of the Company Awards covering an aggregate of more than seven hundred thousand (700,000) shares of Common Stock.

6.7    CEV. A CEV feature of an Award shall entitle the Participant, at the discretion of the Committee, to receive from the Company cash in an amount equal to the excess (if any) of the Fair Market Value (as of the date of exercise by the Committee of the CEV feature) per share over the CEV Price per share specified for such CEV, multiplied by the total number of shares of the CEV being granted by the Committee.

6.8    Tandem Awards. The Committee may grant two or more Incentives in one Award in the form of a “tandem Award,” so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and a CEV are issued in a tandem Award, and the Committee determines to exercise the CEV with respect to 100 shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of 100 shares of Common Stock.

6.9    CEV Price. The CEV Price for any share of Common Stock subject to a CEV shall be equal to the Fair Market Value of the share on the Date of Grant of the grant which contains the CEV.

ARTICLE 7

AWARD PERIOD; VESTING

7.1    Award Period.

(a)    Subject to the other provisions of this Plan, the Committee shall specify in the Award Agreement the Award Period. No Stock Option granted under the Plan may be exercised at any time after the end of its Award Period. The Award Period for any Stock Option shall be no more than ten (10) years from the Date of Grant of the Stock Option. However, if an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the Award Period of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant.

(b)    In the event of a Termination of Service of a Participant, the Award Period for a Stock Option shall be reduced or terminated in accordance with the Award Agreement.

7.2    Vesting. The Committee, in its sole discretion, may determine that an Incentive will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting, then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Incentive may be vested.

ARTICLE 8

EXERCISE OF INCENTIVE

8.1    In General. The Committee, in its sole discretion, may determine that a Stock Option will be immediately exercisable, in whole or in part, or that all or any portion may not be exercised until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option.

8.2    Securities Law and Exchange Restrictions. In no event may an Incentive be exercised or shares of Common Stock be issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration under state or federal securities laws required under the circumstances has not been accomplished.

8.3    Exercise of Stock Option.

(a)    Notice and Payment. Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the Committee or other designated person setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised and the date of exercise thereof (the “Exercise Date”). Unless otherwise provided in the Award Agreement, on the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (a) cash or check, bank draft, or money order payable to the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) to the extent otherwise permitted by applicable law, by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is permitted by applicable law and acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option with an Option Price equal to the value of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered.

(b)    Issuance of Certificate. Except as otherwise provided in Section 6.5 hereof (with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause certificates for the Common Stock then being purchased to be delivered as directed by the Participant (or the person exercising the Participant’s Stock Option in the event of his death) at its principal business office promptly after the Exercise Date; provided that if the Participant has exercised an Incentive Stock Option, the Company may at its option retain physical possession of the certificate evidencing the shares acquired upon exercise until the expiration of the holding periods described in Section 422(a)(1) of the Code. The obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at any time the Committee shall determine in its discretion that the listing or registration of the Stock Option or the Common Stock upon any securities exchange or

inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such listing, registration, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.

(c)    Failure to Pay. If the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the Company.

8.4    CEVs. Subject to the conditions of Section 6.4, this Section 8.4, the Award Agreement and such administrative regulations as the Committee may from time to time adopt, a CEV may be exercised by the delivery (including by FAX) to the Participant of written notice by the Committee or other designated person setting forth the number of shares of Common Stock with respect to which the CEV is to be exercised and the date of exercise thereof (the “Exercise Date”). On the Exercise Date, the Participant shall receive from the Company cash in an amount equal to the excess (if any) of the Fair Market Value (as of the date of the Participant’s exercise of the Stock Option) per share of Common Stock over the CEV Price per share specified in such CEV, multiplied by the total number of shares of Common Stock covered by the exercised CEV.

8.5    Disqualifying Disposition of Incentive Stock Option. If shares of Common Stock acquired upon exercise of an Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.

ARTICLE 9

AMENDMENT OR DISCONTINUANCE

Subject to the limitations set forth in this Article 9, the Board may at any time and from time to time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment which requires stockholder approval in order for the Plan and Incentives awarded under the Plan to comply with applicable law, including Section 162(m), 421 and 422 of the Code, to the extent the Board intends for those provisions to apply, shall be effective unless such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by applicable law, no action contemplated or permitted by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant.

ARTICLE 10

TERM

The Plan shall be effective from the date that this Plan is approved by the Board. Unless sooner terminated by action of the Board, the Plan will terminate on June 23, 2013, but Incentives granted before that date will continue to be effective in accordance with their terms and conditions.

ARTICLE 11

CAPITAL ADJUSTMENTS

In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the Common Stock such that an adjustment is determined by the Committee to be appropriate to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of the (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (iii) the number of shares and type of Common Stock (or other securities or property) specified as the annual per-participant limitation under Section 6.6 of the Plan, (iv) the Option Price of each outstanding Award, (v) the amount, if any, the Company pays for forfeited shares of Common Stock in accordance with Section 6.5, and (vi) the number of or CEV Price of shares of Common Stock then subject to outstanding CEV’s previously granted and unexercised under the Plan to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate CEV Price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. In lieu of the foregoing, if deemed appropriate, the Committee may make provision for a cash payment to the holder of an outstanding Award. Notwithstanding the foregoing, no such adjustment or cash payment shall be made or authorized to the extent that such adjustment or cash payment would cause the Plan or any Stock Option to violate Code Section 422. Such adjustments shall be made in accordance with applicable law and the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject.

Upon the occurrence of any such adjustment or cash payment, the Company shall provide notice to each affected Participant of its computation of such adjustment or cash payment which shall be conclusive and shall be binding upon each such Participant.

ARTICLE 12

RECAPITALIZATION, MERGER AND CONSOLIDATION

12.1    No Effect on Company’s Authority. The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure and its business, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

12.2    Conversion of Incentives Where Company Survives. Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a holder of the number of shares of Common Stock subject to the Incentive would have been entitled.

12.3    Exchange or Cancellation of Incentives Where Company Does Not Survive. In the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each share of Common Stock subject to the

unexercised portions of outstanding Stock Options or CEVs, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Stock Options or CEVs to be thereafter exercisable for such stock, securities, cash, or property in accordance with their terms.

Notwithstanding the foregoing, however, all Stock Options or CEVs may be canceled by the Company, in its sole discretion, as of the effective date of any such reorganization, merger, consolidation, or share exchange, or of any proposed sale of all or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, by either:

(a)    giving notice to each holder thereof or his personal representative of its intention to cancel such Stock Options or CEVs and permitting the purchase during the thirty (30) day period next preceding such effective date of any or all of the shares subject to such outstanding Stock Options or CEVs, including in the Board’s discretion some or all of the shares as to which such Stock Options or CEVs would not otherwise be vested and exercisable; or

(b)    paying the holder thereof an amount equal to a reasonable estimate of the difference between the net amount per share payable in such transaction or as a result of such transaction, and the exercise price per share of such Stock Option (hereinafter the “Spread”), multiplied by the number of shares subject to the Stock Option. In cases where the shares constitute, or would after exercise, constitute Restricted Stock, the Company, in its discretion may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the Spread, appropriate adjustments to give effect to the existence of the Stock Options shall be made, such as deeming the Stock Options to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Options as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed.

(c)    An Award that by its terms would be fully vested or exercisable upon such a reorganization, merger, consolidation, share exchange, proposed sale of all or substantially all of the assets of the Company or dissolution or liquidation of the Company will be considered vested or exercisable for purposes of Section 12.3(a) hereof.

ARTICLE 13

LIQUIDATION OR DISSOLUTION

Subject to Section 12.3 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Incentive, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) then in such event the Option Prices or CEV Prices then in effect with respect to each Stock Option or CEV shall be reduced, on the payment date of such distribution, in proportion to the percentage reduction in the tangible book value of the shares of the Company’s Common Stock (determined in accordance with generally accepted accounting principles) resulting by reason of such distribution.

ARTICLE 14

INCENTIVES IN SUBSTITUTION FOR

INCENTIVES GRANTED BY OTHER ENTITIES

Incentives may be granted under the Plan from time to time in substitution for similar instruments held by employees or directors of a corporation, partnership, or limited liability company who become or are about to become Employees of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company, the acquisition by the Company of equity of the employing entity, or any other similar transaction pursuant to which the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the Incentives in substitution for which they are granted.

ARTICLE 15

MISCELLANEOUS PROVISIONS

15.1    Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution.

15.2    No Right to Continued Employment. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary.

15.3    Indemnification of Board and Committee. No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company, and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.

15.4    Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.

15.5    Governing Law and Compliance With Other Laws and Regulations. The validity, construction and effect of the Plan, any Award Agreement and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law (including without limitation Section 16 of the 1934 Act, Section 162(m) of the Code and the Sarbanes-Oxley Act of 2002) or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded; and, as a condition of any sale or issuance of shares of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

15.6    Tax Requirements. The Company shall have the right to deduct from all amounts hereunder paid in cash or other form, any Federal, state, or local taxes required by law to be withheld with respect to such payments. The Participant receiving shares of Common Stock issued under the Plan, unless otherwise provided in the Award Agreement, shall be required to pay the Company the amount of any taxes which the Company is required to withhold with respect to such shares of Common Stock. Notwithstanding the foregoing, in the event of an assignment of a Nonqualified Stock Option pursuant to Section 15.7, the Participant who assigns the Nonqualified Stock Option shall remain subject to withholding taxes upon exercise of the Nonqualified Stock Option by the transferee to the extent required by the Code or the rules and regulations promulgated thereunder. Such payments shall be required to be made prior to the delivery of any certificate representing such shares of Common Stock. Such payment may be made, unless otherwise provided in the Award Agreement, (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligation of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate fair market value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in the Award Agreement impose any additional tax requirements or provisions that the Committee deems necessary or desirable.

15.7    Stock Option Assignability. Incentive Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 15.9 that is not required for compliance with Section 422 of the Code.

Except as otherwise provided herein, Nonqualified Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution. The Committee may, in its discretion, authorize all or a portion of a Nonqualified Stock Option granted to a Participant to be on terms which permit transfer by such Participant, or by a Permitted Transferee, to (i) the Company, (ii) the spouse (or former spouse), children or grandchildren of the Participant (“Immediate Family Members”), (iii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iv) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by Immediate Family Members (“Permitted Transferees”), provided that (x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to which such Nonqualified Stock Option is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) except for transfers between Permitted Transferees, subsequent transfers of transferred Nonqualified Stock Options shall be prohibited except those by will or the laws of descent and distribution.

Following any transfer, any such Nonqualified Stock Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term “Participant” shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which the Nonqualified Stock Options shall be exercisable by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of a Nonqualified Stock Option of any expiration, termination, lapse or acceleration of such Stock Option. Except as otherwise provided in the Award Agreement, the Company

shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under a Nonqualified Stock Option that has been transferred by a Participant under this Section 15.7.

15.8    Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Incentives granted under this Plan shall constitute general funds of the Company.

15.9    Legend. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed):

On the face of the certificate:

“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”

On the reverse:

“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Landry’s Restaurants, Inc 2003 Equity Incentive Plan, a copy of which is on file at the principal office of the Company in Houston, Texas. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.”

The following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:

“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”

A copy of this Plan shall be kept on file in the principal office of the Company in Houston, Texas.

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EX-10.34

EXHIBIT 10.34

MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT (the “Agreement”) shall be effective as of June         , 2003 (the “Effective Date”), by and between Fertitta Hospitality, LLC, a Texas limited liability corporation (the “Owner”) and Landry’s Management, L.P., a Delaware limited partnership (the “Manager”).

WITNESSETH:

WHEREAS, the Owner possesses the Hotel properties and ancillary facilities located in Galveston, Texas and further described on Exhibit “A” (the “Hotels”); and

WHEREAS, the Manager is experienced in the ownership, operation and management of Hotels and restaurants, including bar operations.

NOW, THEREFORE, in consideration of the mutual provisions and covenants herein contained, the Owner and the Manager agree as follows:

1. Appointment of Manager. The Owner hereby hires the Manager and the Manager hereby accepts the appointment as exclusive Manager of the Hotels. The Manager shall at all times during the term of this Agreement act in the capacity of an independent contractor. Except as otherwise expressly provided herein, the management of the Hotels shall be under the sole supervision, management, direction and control of the Manager. The Owner shall have no right to supervise the Manager or its employees, in the day-to-day operation of the Hotels or the manner, method or means in which the day-to-day operations are performed. The Manager agrees that the operation of the Hotels shall be in accordance with this Agreement, but that the detailed method of doing same shall be under the exclusive control of the Manager. In no event shall either the Owner or the Manager be considered the agent or employee of the other, it being the intent of the parties hereto that this Agreement shall not constitute nor be construed to create a joint venture, partnership or association between the Manager and the Owner.

2. Term. The term of this Agreement shall commence as of the Effective Date, and shall terminate on the date which is three (3) years after the Effective Date, unless sooner terminated as herein provided. This Agreement shall be automatically renewed for successive additional one (1) year terms unless either party shall notify the other in writing of its intention not to renew at least sixty (60) days prior to the expiration of the initial term and each renewal term hereof.

3. Operation of the Hotels. The Manager shall have the exclusive right to direct, supervise, manage and operate the Hotels as an independent contractor for and on behalf of the Owner and for the Owner’s account and shall determine the programs and policies to be followed in connection therewith, all in accordance with the provisions of this Agreement.

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Without limiting the generality of the foregoing, the Manager shall be and is hereby granted the authority to do the following, in each instance, however, subject to the limitations set forth in Paragraphs 4 and 5 of this Agreement:

(a) Employ, pay, supervise and discharge on behalf of the Owner all employees and personnel necessary for the operation of the Hotels.

(b) Cause the Hotels, and its appurtenances and grounds to be maintained according to the highest standards applicable within the hotel industry. Such maintenance shall include, but shall not be limited to, interior and exterior cleaning, painting, decorating, plumbing, heating and ventilation, carpentry and such other maintenance and repair work as may be necessary. The cost of such maintenance and repair work shall be borne by the Owner, except that no disbursement for maintenance and repair shall be made in excess of $5,000.00, nor shall the total disbursements for maintenance and repair exceed in any calendar year the amount budgeted therefor in the Annual Budget referred to in Paragraph 4 unless specifically authorized in writing by the Owner; provided, however, that emergency repairs involving manifest danger to life or property, or immediately necessary for the preservation and safety of the Hotels, or for the safety of its guests, employees, or invites or required to avoid the suspension of any necessary service of the Hotels, may be made by the Manager irrespective of the cost limitations imposed by this Paragraph.

(c) Negotiate and enter into service contracts required in the ordinary course of business in operating the Hotels, including without limitation, contracts for electricity, gas, telephone, security, trash, cable television, supplies, landscaping, insect extermination and other services which are customarily and usually furnished in connection with the normal operation of a first class hotel and which the Manager deems advisable.

(d) Supervise and purchase or arrange for the purchase of all inventories, provisions and supplies which in the normal course of business are necessary and proper to maintain and operate the Hotels, all in the best interest of the Owner.

(e) Operate the Hotels and all of its facilities and activities in the same manner as is customary and usual in the operation of other first class hotels and provide such facilities and services at the Hotels as are usually and customarily provided by operators of hotels of comparable class and standing consistent with the Hotels’ facilities.

(f) Arrange and contract for all reasonable advertising and promotion which the Manager may deem necessary for the successful operation of the Hotels.

4. Annual Budget. On or before October 15th of each year during the term of this Agreement (other than the first partial year – which date shall be on or before June 1st), the Manager shall furnish to the Owner a budget of anticipated expenses and other

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cash expenditures for the succeeding calendar year in such detail as the Owner shall reasonably require. Prior to the commencement of said succeeding calendar year, the Owner and the Manager shall attempt to agree upon and adopt a budget for said calendar year. In the event the Owner and the Manager fail to agree upon a budget for said calendar year, the budget in effect for the immediately preceding calendar year shall constitute the budget for the next calendar year until a new budget can be agreed upon. However, the Owner hereby covenants and agrees with the Manager that it will follow the reasonable recommendations of the Manager for keeping or maintaining the Hotels in good repair and first class appearance and properly outfitted and equipped for proper operation. In the event of a dispute over the budget, the parties may submit this dispute to arbitration which shall be held in accordance with the rules of the American Arbitration Association.

5. Standard of Operation. Manager shall operate the Hotels in conformity with the standards of other first class hotels located in the greater Houston-Galveston area. A first class hotel shall include the Hyatt in downtown Houston, Marriott or Omni hotels in the Galleria area in Houston. Notwithstanding the foregoing, Manager shall not be obligated to operate the Hotels in conformity with the standards provided for herein to the extent it may be prevented by (i) any act of force majeure, or (ii) breach by Owner of its obligations hereunder. Manager shall present to Owner on or before October 15^th of each year, an Annual Business Plan for the Hotels.

General. Subject to the provisions of the Annual Budget, Manager is authorized to operate the Hotels in the following manner:

(a) Labor Policies. Manager will establish labor policies at the Hotels, including the hiring and discharging of all employees, supervision and training of employees and entering into employment contracts.

(b) Credit and Payment Policies. Manager will establish credit policies (including entering into agreements with credit card organizations), terms of admittance, charges for rooms, entertainment and amusement policies, and food and beverage policies and use reasonable efforts to collect all charges, rents, and other amounts due from the Hotels’ guests, tenants, parties providing services and concessionaires, if any.

(c) Leases and Concessionaires. In the name of and for the account of Owner, Manager may lease to tenants commercial space at the Hotels and may license and grant food and beverage concessions; provided that any lease having a term in excess of one (1) month or involving rent or similar payments to the Hotels of more than $10,000 per calendar year shall be subject to Owner’s approval.

(d) Legal Proceedings. Manager shall institute, prosecute, defend, settle and compromise such legal proceedings, in the name of Owner, as Manager shall reasonably deem appropriate in connection with the operation of the Hotels (i) without Owner’s consent where such proceedings are of a non-extraordinary

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nature, such as, without limitation, collections, enforcement of contract, labor and employment matters, and proceedings when the amount in controversy is less than $20,000, and (ii) in all other cases, with the consent of Owner, which consent shall not be unreasonably withheld or delayed.

(e) Marketing. Manager shall institute and coordinate all phases of promotion, publicity and marketing relating to the Hotels.

(f) Standard Procedures. Manager will implement Manager’s standard operational, administrative, accounting, budgeting, and operational policies and practices. Owner has reviewed such policies and practices and consents to same.

(g) Utilities, Permits and Maintenance. To the extent prudent and necessary for the operation of the Hotels, Manager will:

(i) arrange for water, electricity, gas, power, telephone, vermin extermination, landscaping, trash removal, equipment maintenance, security and other services necessary for the proper operation and maintenance of the Hotels, to the extent available on commercially reasonable terms;

(ii) to the extent that it is within Manager’s power to do so using commercially reasonable efforts, obtain and maintain in full force and effect all permits and licenses (including, without limitation, liquor licenses, restaurant licenses and business licenses), and Owner shall cooperate with Manager to apply for and maintain any such permits and licenses; and

(iii) purchase on behalf of Owner all supplies and inventories, and those services and other merchandise necessary for the proper operation and maintenance of the Hotels as contemplated by this Agreement; and in connection with such purchases, Manager may receive rebates, discounts, refunds, allowances or other forms of incentive payments from vendors, and Manager hereby reserves the right to retain any such incentive payments for its own account.

6. Limitation, Contracts, Agreements, Etc. The Manager shall have no authority to enter into any contract, lease, license, concession, commitment, undertaking, purchase order or other agreement relating to the Hotels requiring an expenditure in excess of $5,000.00 or which is not to be fully performed within one (1) month without the prior written consent of the Owner. In carrying out its rights and duties set forth herein, the Manager’s expenditures shall not, without the prior written approval of the Owner, exceed for any calendar year the total amount budgeted in the Annual Budget on an overall and on a line-item basis.

7. Employees. Subject to the Annual Budget, Manager will recruit, hire and supervise all Hotels’ employees. All decisions concerning the hiring and discharge of all Hotels’ employees shall be made by Manager or in accordance with Manager’s operational

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policies and practices. Notwithstanding the foregoing, Owner shall have approval over the hiring and firing of the General Manager and all department heads, such approval not to be unreasonably withheld. Personnel employed by the Manager to properly maintain and operate the Hotels may be employees of the Owner or Manager. The Manager shall take such action as it deems necessary to insure that proper payroll procedures are followed and compliance with applicable laws, such as payroll tax withholdings, are obtained. As an inducement to Owner to enter into this Agreement, Manager shall allow the Hotels’ employees to participate in Manager’s dining/discount program which is available to all of Manager’s restaurant employees.

8. Operating Expenses Borne by Owner. All expenses incurred by the Manager in connection with the operation and maintenance of the Hotels under this Agreement shall be borne by the Owner, except Manager’s general corporate overhead and the Centralized Services defined in Section 16 herein. Manager’s expenses for general corporate overhead and the Centralized Services shall be borne by Manager. Operating expenses shall include all costs and expenses of maintaining, conducting and supervising the operation of the Hotels (which costs and expenses do not include depreciation and amortization and the costs of any other things specified herein to be done or provided at Owner’s or Manager’s sole expense or any payments on any indebtedness including, without limitation, the indebtedness secured by a first lien deed of trust against the Hotels) incurred by Owner or by Manager directly or at Owner’s or Manager’s request pursuant to this Agreement, including without limitation:

(a) The cost of all food and beverage sold or consumed and of all inventories and supplies. Supplies include all consumable or expendable items for operation of the Hotels, including, without limitation, supplies for laundry, housekeeping, food and beverage service, engineering and accounting uses, together with paper supplies and miscellaneous general supply items.

(b) The budgeted salaries and wages of the General Managers, Controllers, department heads and other Hotels’ employees (whether in the employ of Manager or Owner), including costs of payroll taxes and employee benefits (which benefits may include, without limitation, a 401K plan, medical insurance, life insurance and a bonus program) and the costs of moving personnel, their families and their belongings to the area in which the Hotels are located at the commencement of their employment at the Hotels.

(c) The cost of all other goods and services obtained by Manager in connection with its operation of the Hotels, including, without limitation, heat and utilities, office supplies used at the Hotels and all services performed by third parties, including leasing expenses in connection with telephone and data processing equipment and such other equipment as the parties hereto may agree upon in writing.

(d) The cost of repairs to and maintenance of the Hotels.

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(e) Insurance premiums for insurance related to Hotels’ employees and for insurance required to be maintained hereunder. Premiums under blanket policies will be allocated among properties covered.

(f) All taxes, assessments and other charges (other than federal, state or local income taxes and franchise taxes or the equivalent) payable by or assessed against Manager with respect to the operation of the Hotels and water and sewer charges, including all taxes levied or imposed against the Hotels or its contents, such as real and personal property taxes.

(g) Legal and accounting fees for services directly related to the operation of the Hotels.

(h) The costs and expenses of technical consultants and specialized operational experts for specialized services in connection with nonrecurring work on operational, functional, decorating, design or construction problems and activities.

(i) All bank fees and charges for maintaining the Hotels accounts and for processing of credit cards, debit cards and similar arrangements.

(j) All expenses for advertising the Hotels and all expenses of sales promotion and public relation activities, including all license or royalty fees.

All debts and liabilities of the Owner arising in the course of business of the Hotels shall be obligations of the Owner, and the Manager shall not be liable for any such obligations by reason of its management, supervision and operation of the Hotels for the Owner.

9. Expenses to be Borne by Manager. The Manager’s overhead and other costs of operating the Manager’s operations shall be the responsibility of the Manager. Extraordinary expenses such as out-of-town travel on behalf of the Owner in connection with the operation of the Hotels shall be a reimbursable expense to be paid by the Owner, so long as Manager has obtained Owner’s prior approval. Manager may use equipment of Owner in furtherance of Manager’s business outside of the Hotels. In such event, Manager shall reimburse Owner a reasonable fee for use of such equipment.

10. Compliance with Laws, etc. Manager shall promptly comply with all federal, state and local laws and ordinances and lawful orders and regulations affecting the Hotels, and the health, cleanliness, safety, occupancy and use of same. Manager shall not cause or permit the use, generation, storage, or disposal in, on or about the Hotels of any substance, materials or wastes in violation of any federal, state or local laws from time to time in effect concerning hazardous, toxic or radioactive materials (“Hazardous Substances”). Manager shall promptly and fully comply with all state and local laws in effect from time to time prohibiting discrimination or segregation by reason of race, color, religion, disability, sex or national origin or otherwise. Manager shall notify Owner immediately of any alleged notice of violation of any law, ordinance, permit or regulation concerning the Hotels or any of its employees.

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11. Revenues and Expense.

(a) Manager shall use its best efforts to collect all revenues for the Hotels. All monies collected from the management, maintenance, operation and use of the Hotels by the Manager, shall be deposited in a special account (herein referred to as the “Owner’s Account”) in the Owner’s name in a banking institution as agreed by the parties hereto.

(b) The Manager or Owner shall pay or cause to be paid all operating expenses (including all reimbursable expenses) of the Hotels, including compensation due the Manager under this Agreement, in accordance with the provisions of this Agreement out of the “Hotel Operating Account.” Manager may transfer funds, with Owner’s approval, from the Owner’s Account to the Hotel Operating Account to pay for all operating expense. However, no payment shall be made without the Owner’s consent for any expense which, under the provisions of this Agreement, requires the Owner’s consent and approval or not otherwise provided for in the Annual Budget.

(c) From time to time, if and as required, the Owner shall cause to be deposited to the Hotel Operating Account funds sufficient in the amount to constitute reasonable working capital for the operation of the Hotels.

(d) Any dispute as to the amount of working capital required for the operation of the Hotels shall be resolved by the firm of certified public accountants then employed by the Hotels to perform the annual audit of the books, or, in the absence of such a firm, by a firm of independent certified public accountants designated and agreed upon by the Owner and the Manager.

12. Books, Records and Statements.

(a) The Manager shall, at the Owner’s expense, keep full and adequate books of account and other records reflecting the results of operations of the Hotels on an accrual basis. Manager shall provide to Owner daily reports, booking reports, payroll reports, accident reports, and all other records or reports of operations as and when produced. Such records shall show income and expenses in connection with the daily management, maintenance, use and operation of the Hotels, to the extent that any accounts payable, other obligations, cash, accounts receivable, and other assets pertaining to the management of the Hotels, can be identified and the proper amounts determined at all times. The Manager may make such modifications in its accounts as are consistent with the Manager’s standard practice in accounting for its operations. Manager shall deliver to Owner on a monthly basis a detailed statement of operating expenses. Owner shall transfer funds monthly from Owner’s Account to the Hotel Operating Account to pay for all proper operating expenses on a timely basis, unless otherwise paid by Owner.

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(b) The Manager shall cause to be prepared in accordance with generally accepted accounting principles on a monthly basis, a financial Profit and Loss statement showing in detail the financial operations of the Hotels. Balance sheets will be prepared on a monthly and on an annual basis. Profit and Loss statements are to be prepared and delivered to the Owner or its appointed representatives not later than twenty (20) days after the end of each month during the term of the Agreement. The Manager shall use its best efforts to cause to be prepared and delivered to the Owner within sixty (60) days after the end of each fiscal year financial statements reflecting the operations of the Hotels for such fiscal year.

(c) At the option and expense of the Owner, exercisable at any time and for any period, the Manager shall employ a reputable recognized firm of certified public accountants to conduct an audit of the Manager’s books of account and other records reflecting the financial results of operations of the Hotels.

13. Capital Expenditures. Owner shall be responsible for all capital expenditures incurred by or for the improvement of the Hotels. Manager shall not incur any capital expenditures without prior approval from Owner. Manager shall assist and advise Owner in connection with any capital expenditures for the Hotels, including reviewing construction contracts, designs, plan reviews and meeting with architects, engineers or any construction contractors or material suppliers. Manager’s recommended capital expenditures shall be included in the Annual Business Plan.

14 Manager Not Obligated to Advance Funds. The Manager shall not be obligated to advance any of its own funds to or for the account of the Owner, nor to incur any liability unless the Owner shall have deposited in the Operating Account funds necessary for the discharge thereof. However, if the Manager shall have advanced any funds in payment of a permitted expense for the maintenance and operation of the Hotels, the Owner shall reimburse the Manager therefor on demand.

15. Marketing Plan

(a) Hotels’ Sales Plan. Manager shall formulate formalized marketing plans for the Hotels which shall be included in the Annual Business Plan. Owner shall have the right to review and approve the plans, such approval not to be unreasonably withheld. The Hotels’ employees will secure bookings for the Hotels and will encourage the use of the Hotels by tourists, special groups, travel congresses, travel agencies, airlines and other recognized sources of hotel business. The Hotels’ employees will represent the Hotels at appropriate conventions and travel congresses. Owner agrees to honor all reservations made by Manager and the Hotels’ employees in the ordinary course of business even though such reservations extend for a period of time beyond or are for a period of time commencing subsequent to the expiration or earlier termination of this Agreement.

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(b) Hotels Communications and Public Relations. Manager will provide to the Hotels through Hotels’ employees or will cause to be provided to the Hotels, those advertising, public relations and promotional services which Manager considers necessary and appropriate to promote the name and facilities of the Hotels. These services include without limitation:

(i) developing and implementing the Hotels’ communications plan following Manager’s guidelines, and Manager’s sales, advertising and public relations programs;

(ii) selecting and providing required guidance to the public relations personnel of the Hotels;

(iii) preparing and disseminating news releases for trade and consumer publications, both national and international; and

(iv) coordinating local publicity.

16. Hotels Facilities. Owner shall provide all necessary equipment, computers, software, furniture and supplies necessary for the operation of the Hotels in accordance with the standards provided for herein. Owner shall provide appropriate office and/or back of the house space for the Manager and the Hotels’ employees, whether employed by Manager or Owner. Manager agrees not to make any changes to the Hotels’ equipment, furniture, computers, software, office and/or back of the house space without Owner’s consent, which consent shall not be unreasonably withheld.

17. Insurance. The Manager shall provide and maintain, at the Owner’s cost and expense, insurance sufficient to furnish to the Owner and the Manager reasonable and adequate protection for the operation of the Hotels. All insurance shall be in the name of the Owner and the Manager as named insureds and shall contain riders and endorsements adequately protecting the interests of the Owner and the Manager as they may appear. Manager will maintain on the Hotels, as a minimum, the following insurance underwritten by an insurer approved by Owner:

(a) worker’s compensation insurance in an amount required by law;

(b) employment practices liability insurance (including coverage for harassment, discrimination and wrongful termination, and covering defense and indemnity costs) with a limit of $1,000,000 per loss;

(c) the holder of the liquor license will maintain liquor liability insurance with single limit coverage for personal and bodily injury and property damage of at least $10,000,000 for each occurrence naming Owner as an additional insured;

(d) commercial general liability insurance, (including coverage for product liability, completed operations, contractual liability, host liquor liability and fire legal

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liability) and comprehensive automobile liability insurance (including hired and non-owned liability) with single-limit coverage for personal and bodily injury and property damage of at least $10,000,000 per occurrence naming Owner as an additional insured. In connection with all construction, Manager will cause the general contractor to maintain comprehensive general liability insurance and comprehensive automobile liability insurance (including hired and non-owned liability) with limits of at least $5,000,000 per occurrence for personal and bodily injury and property damage underwritten with insurers approved by Owner. Owner will be named as an additional insured; and

(e) Property and casualty coverage in an amount equal to 100% of the replacement value of all buildings, furniture, fixtures and equipment, inventory and all other assets under management, together with boiler and machinery coverage and business interruption coverage for at least six (6) months of operations.

At all times during the term, Manager will furnish to Owner certificates of insurance evidencing the term and limits of coverage in force, names of applicable insurers and persons insured, and a statement that coverage may not be cancelled, altered or permitted to lapse or expire without 30 days’ advance written notice to Owner. Revised certificates of insurance shall be forwarded to Owner each time a change in coverage or insurance carrier is made by Manager, and/or upon renewal of expired coverages. At Owner’s option, Manager may be required to provide certified insurance policy copies. Manager may include the Hotels (and an adjacent property to the Hotels presently managed by Owner) on Manager’s bid submittal to acquire insurance for Manager’s properties in order to obtain the best available insurance pricing. In such event, Owner shall pay an allocated cost based on Owner’s property values, projected revenues and payroll as a percentage of the total submitted property values, projected revenues and payroll. Deductibles or self-insured retentions are subject to approval by Owner.

18. Centralized Services. To ensure that the Hotels are being operated at an appropriate standard and to maintain identity and consistency with other first class hotels and restaurants, Manager will provide certain Centralized Services to the Hotels, including, without limitation, the selection of the General Managers and department heads for the Hotels, and the review of the operation and maintenance of the Hotels from time to time in accordance with Manager’s established management practices and policies. The Centralized Services also include services provided for the general benefit of Owner by Manager’s corporate and regional sales and marketing staff, food and beverage staff, financial services staff, human resources staff, construction and development staff, graphics art personnel, legal staff, risk management staff, technology staff, transportation staff and other personnel. The type of services being offered may change from time to time at the discretion of Manager. The corporate and regional sales and marketing staff of Manager will assist Hotels’ employees to secure bookings for the Hotels’ guest rooms, meeting spaces, and food and beverage facilities through the corporate sales offices of Manager. Such corporate and regional sales and marketing staff will also promote the Hotels to tourists, special groups, travel congresses, travel agencies, airlines and other recognized sources of hotel business. The Hotels will be represented by Manager’s corporate staff at the appropriate industry conventions.

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19. Management Fee of Manager

(a) Fee for Operations. From and after the Effective Date and until termination of this Agreement, the Owner shall pay to the Manager for services rendered under this Agreement a management fee determined pursuant to Exhibit “B” attached hereto (the “Management Fee”).

(b) Payment of Management Fee of Manager. The Management Fee for each month shall be due to the Manager on the fifteenth (15th) day of the immediately succeeding month.

(c) Payment of Expenses; Working Capital. All operating expenses of the Hotels will be paid by Owner, including payroll expenses and other fees and expenses to be paid to or reimbursed to Manager under this Agreement. In any event, sums due Manager will be due and payable not later than the date that the Profit and Loss statements are delivered to Owner. Manager will not be required to make any advance or payment to or for the account of Owner. Owner is responsible for and will pay promptly any debts or liabilities properly incurred by Manager under this Agreement. If Owner fails timely to make any payment requested by Manager hereunder, Manager may but shall have no obligation (in its sole discretion), to advance such amount to Owner by paying those fees and reimbursable expenses, which in such event, Owner shall reimburse Manager on demand.

(d) Reimbursement of Costs and Expenses for Hotels’ Operations. Owner will pay Manager for all costs and expenses incurred by Manager for Owner’s account in the ordinary course of business under the terms and provisions of this Agreement. These costs and expenses will be considered operating expenses and will include, without limitation the following:

(i) Hotels’ Employees. The actual salaries and wages, including costs of payroll taxes, bonuses, retirement plan contributions, fringe benefits, and related payroll items incurred with respect to the Hotels’ employees (employed by Manager) and the moving and related expenses (in accordance with Manager’s standard policies, as amended from time to time by Manager) incurred in connection with relocating any Hotels’ employees to the Hotel;

(ii) Out-of-pocket Expenses. Actual travel and out-of-pocket expenses incurred in connection with the management of the Hotels; and

(iii) Promotional, Advertising and Marketing Expenses. Those expenses incurred for production, distribution promotional, advertising and/or marketing expenses relating to the Hotels, including but not limited to

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media buys, brochures, pamphlets, and materials for the promotion of the Hotels and employee relations, and those expenses incurred as a result of the attendance of Hotels’ and/or Manager’s employees at conventions, meetings, seminars, conferences and travel congresses. Manager may cross promote and/or market the Hotels with other properties, facilities and restaurants under management by Manager, subject to Owner’s prior approval. In such event, Owner will pay as an operating expense an allocated cost for the production, distribution, promotional, advertising and/or marketing expenses. Nothing contained herein shall obligate Owner to pay, incur or reimburse Manager for Centralized Services.

(iv) Excludable Expenses. Notwithstanding the foregoing, Hotels’ employees, whether employed by Manager or Owner, may be directed from time to time to perform work for Manager not related to the Hotels. In such event, a portion of the applicable Hotels’ employees salaries and wages shall not be an operating expense of the Hotels. Manager, if using Hotels’ employees for Manager’s benefit not related to the Hotels, shall identify the employees to Owner on a monthly basis and shall properly account to Owner so that Owner is only responsible for salaries and wages for work performed at or related to the Hotels. Manager may identify in advance to Owner those employees or positions that will be performing services for Manager unrelated to the Hotels on a regular basis and stipulate, with Owner’s approval, to an allocation of payroll expenses for said employees or positions. Manager and Owner agree that the employee positions listed on Schedule 1 shall be Hotels’ employees that will be employed by Owner that perform services for or at Manager’s direction for the Hotels and unrelated to the Hotels on a regular basis, and that the stated cost allocations in Schedule 1 between Owner and Manager are acceptable. The employee positions that will perform work and or services for the Hotels and unrelated to the Hotels listed on Schedule 2 will be Hotels’ employees that are employed by Manager. The allocated portion of payroll expenses set forth on Schedule 2 shall be reimbursable operating expenses and are approved. The parties agree that the employees, employee positions and allocations are subject to change upon mutual agreement of the parties.

(v) Transportation. Owner shall pay Manager a reasonable fee for transportation equipment of Manager used in support of or in connection with the operation of the Hotels. No transportation equipment fees for Manager’s transportation equipment shall be charged to Owner without Owner’s prior approval of such fees.

(e) Allocated Expenses. Manager has executed an agreement with the City of Galveston to construct, manage, and operate the Galveston Island Convention Center. As a further inducement to Manager to enter into this Agreement, Manager may use Hotels’ employees and resources of the Hotels, including but not limited to equipment, vehicles, supplies, etc., in order to minimize

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Manager’s costs, expenses and overhead in the execution and/or performance of its duties under the terms of its agreement with the City of Galveston. Manager shall reimburse Owner for Manager’s use of Hotels’ employees and resources, including but not limited to equipment, vehicles, supplies, etc., as agreed between the parties. Manager shall account to Owner on a monthly basis for the use of such resources, if any.

(f) Hotel Bank Operating Account. Manager shall establish bank accounts (“Hotel Operating Accounts”) in the name of the Hotels and Owner at an institution reasonably approved by Owner. The Hotels shall process bank cards through a financial institution selected mutually by Manager and Owner. All processing fees of appropriate banks and all such expenses and fees shall constitute operating expenses of the Hotels.

(g) Withdrawals from Hotel Operating Accounts. Checks or other documents of withdrawal from the Hotel Operating Accounts may be made for any purpose authorized under this Agreement. These checks and documents will be signed by duly authorized representatives of Manager reasonably approved by Owner or by Owner or its designees. Duly authorized representatives of Manager selected by Manager and acting as agents of Owner, Owner or Owner’s designees will be the only signators on the Hotel Operating Accounts.

20. Remittances to Owner. Concurrently with delivery of the monthly Profit and Loss statement, Manager will remit to Owner an amount (“Owner’s Remittance Amount”) equal to any positive balance in the Hotel Operating Accounts that is attributable to the Hotels in excess of the amounts required to (i) pay all operating expenses, and reimbursements of expenses then due under this Agreement, and (ii) all advances made by Manager for Owner. Notwithstanding the foregoing, prior to payment of Owner’s Remittance Amount to Owner, Manager, at Owner’s request, shall pay on behalf of Owner, from the Hotel Operating Accounts, (i) any fixed charges, including real estate taxes and insurance premiums, and (ii) interest and debt service payments. All such remaining amounts due Owner will be transferred to Owner’s Account.

21. Termination. This Agreement may be terminated as hereinafter provided:

(a) Termination by Owner. In the event the Manager fails to perform any covenant on its part to be performed pursuant to the terms of this Agreement, including failure to achieve the financial projections set forth in the Annual Budget over a twelve month period, and such failure continues for a period of thirty (30) days after receiving written notice of such default in the Manager’s obligations hereunder, then, at any time thereafter during the continuance of such failure, the Owner may by written notice immediately terminate this Agreement.

(b) Termination by Manager. In the event the Owner fails to perform any covenant on its part to be performed pursuant to the terms of this Agreement, and such failure continues for a period of ninety (90) days (fifteen [15] days in the event

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of a breach of Paragraph 17(b) hereof) after receiving written notice of such default in the Owner’s obligations hereunder, then, at any time thereafter during the continuance of such failure, the Manager may by written notice immediately terminate this Agreement.

22. Hilton Hotel License Agreement. Owner has executed a License Agreement with Hilton Inns, Inc. for the Galveston Island Hilton for one of the Hotels. Manager has reviewed the License Agreement and agrees to manage, operate and maintain the Galveston Island Hilton in accordance with the standards of the License Agreement, except as otherwise provided herein.

23. IHOP Franchise Agreement. Owner has executed a Franchise Agreement with International House of Pancakes, Inc. for an IHOP in Galveston, Texas. Manager has reviewed the Franchise Agreement and agrees to manage, operate and maintain the IHOP in accordance with the standards of the Franchise Agreement, except as otherwise provided herein.

24. Condominium Agreements. Owner has executed certain agreements with respect to the San Luis Condominiums adjacent to the San Luis Spa, Resort and Conference Center. Manager has reviewed said agreements and agrees that in connection with this Agreement and the services to be performed hereunder, it will abide by such agreements.

25. Miscellaneous.

(a) Assignments. This Agreement shall not be assigned without the prior written consent of the parties hereto.

(b) Notice. Any and all notices, consents, directives or statements by either party intended for the other shall be in writing and shall be deemed given when deposited in the United States Mail, registered or certified, postage prepaid and addressed to the Manager at 1510 West Loop South, Houston, Texas 77027; and to the Owner at Owner’s address set forth in Exhibit “A.” Either party may change its address by notice in accordance with this Paragraph.

(c) Entire Agreement. This Agreement shall constitute the entire Agreement between the Owner and the Manager regarding the management and operation of the Hotels and no variation or modification thereof shall be valid or enforceable except by supplement agreement, in writing, executed in the same manner as this Agreement.

(d) Applicable Law. All questions with respect to the construction of this Agreement and the rights and liabilities of the parties hereto shall be determined in accordance with the laws of the State of Delaware.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written.

OWNER
FERTITTA HOSPITALITY, LLC.
By:
	Tilman J. Fertitta, President

MANAGER:
LANDRY’S MANAGEMENT, L.P.
By its General Partner LANDRY’S G.P., INC.
By:
	Steven L. Scheinthal, Vice President

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EX-14

EXHIBIT 14

Code Of Ethics

For The Chief Executive Officer And Financial Officers Of

Landry’s Restaurants, Inc.

The Chief Executive Officer (“CEO”) and financial officers of Landry’s Restaurants, Inc. (“Landry’s”) have an obligation to Landry’s, its shareholders, the public investor community, and themselves to maintain the highest standards of ethical conduct. In recognition of this obligation, Landry’s has adopted the following standards of ethical conduct for its CEO and financial officers. Adherence to these standards is integral to achieving the objectives of Landry’s and its shareholders. The CEO and financial officers shall not commit acts contrary to these standards, nor shall they condone the commission of such acts by others within Landry’s.

Competence

The CEO and financial officers have a responsibility to:

• Perform their professional duties in accordance with relevant laws, regulations, and technical standards.

• Prepare accurate, complete, clear and timely financial statements, reports and recommendations after appropriate analysis of relevant and reliable information.

Confidentiality

The CEO and financial officers have a responsibility to protect Landry’s by:

• Refraining from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.

• Informing subordinates as appropriate regarding the confidentiality of information acquired in the course of their work and monitoring their activities to assure the maintenance of that confidentiality.

• Refraining from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through third parties.

Integrity

The CEO and financial officers have a responsibility to:

• Comply with rules and regulations of federal, state and local governments, and appropriate private and public regulatory agencies or organizations.

• Act in good faith, responsibly, and without misrepresenting material facts.

• Avoid actual or apparent conflicts of interest (without appropriate approval), and advise all appropriate parties of any potential conflict.

• Refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically.

• Refuse any gift, favor, or hospitality that would unduly influence or would appear to unduly influence their actions.

• Comply with this Code of Ethics.

• Refrain from either actively or passively subverting the attainment of Landry’s legitimate and ethical objectives.

• Recognize and communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.

• Promptly report to senior management or the Audit Committee any fraudulent activities or other significant information relating to material errors in accounting, auditing matters, internal accounting controls or any violation of this Code of Ethics.

• Refrain from engaging in or supporting any activity that would discredit Landry’s.

Disclosure

The CEO and financial officers have a responsibility to promote:

• Full, fair, accurate, timely, and understandable disclosure in the periodic reports Landry’s is required to file.

IN WITNESS WHEREOF, the undersigned certifies that he/she has read the above Code of Ethics and agrees to abide thereby.

	Date:                                     , 2004
(Signature)

(Print Name)

EX-21

EXHIBIT 21

LANDRY’S RESTAURANTS, INC.

LIST OF SUBSIDIARIES

C. A. Muer Corporation

Capt. Crab’s Take-Away of 79th Street, Inc.

CHLN, Inc.

CHLN—Idaho, Inc.

CHLN—Maryland, Inc.

Crab Addison, Inc.

Crab House, Inc.

Cryo Realty, Corp.

CryoTech Industries of North Carolina, Inc.

FSI Devco, Inc.

FSI Restaurant Development, Ltd.

Hospitality Headquarters, Inc.

Houston Aquarium, Inc.

Inn at the Ballpark Catering, Inc.

Island Entertainment, Inc.

Island Hospitality, Inc.

Joe’s Crab Shack—Alabama Private Club, Inc.

Joe’s Crab Shack—Delaware, Inc.

Joe’s Crab Shack—San Diego, Inc.

Landry’s Crab Shack, Inc.

Landry’s Development, Inc.

Landry’s Downtown Aquarium, Inc.

Landry’s Pesce, Inc.

Landry’s G.P., Inc.

Landry’s Limited, Inc.

Landry’s Trademark, Inc.

Landry’s Management, L.P.

Landry’s Private Club—Amarillo, Inc.

Landry’s Private Club—Fort Worth, Inc.

Landry’s Private Club—Lewisville, Inc.

Landry’s Private Club—Mesquite, Inc.

Landry’s Private Club—Plano, Inc.

Landry’s Seafood House—Addison, Inc.

Landry’s Seafood House—Alabama, Inc.

Landry’s Seafood House—Arizona, Inc.

Landry’s Seafood House—Arlington, Inc.

Landry’s Seafood House—Austin, Inc.

Landry’s Seafood House—Bellevue, Inc.

Landry’s Seafood House—Biloxi, Inc.

Landry’s Seafood House—Colorado, Inc.

Landry’s Seafood House—Delaware, Inc.

Landry’s Seafood House—Florida, Inc.

Landry’s Seafood House—Georgia, Inc.

Landry’s Seafood House—Hampton, Inc.

Landry’s Seafood House—Illinois, Inc.

Landry’s Seafood House—Indiana, Inc.

Landry’s Seafood House—Kansas, Inc.

Landry’s Seafood House—Kentucky, Inc.

Landry’s Seafood House—Lafayette, Inc.

Landry’s Seafood House—Little Rock, Inc.

Landry’s Seafood House—Maryland, Inc.

Landry’s Seafood House—Memphis, Inc.

Landry’s Seafood House—Michigan, Inc.

Landry’s Seafood House—Minnesota, Inc.

Landry’s Seafood House—Missouri, Inc.

Landry’s Seafood House—Nevada, Inc.

Landry’s Seafood House—New Jersey, Inc.

Landry’s Seafood House—New Mexico, Inc.

Landry’s Seafood House—New Orleans, Inc.

Landry’s Seafood House—Norfolk, Virginia, Inc.

Landry’s Seafood House—North Carolina, Inc.

Landry’s Seafood House—Ohio, Inc.

Landry’s Seafood House—Oklahoma, Inc.

Landry’s Seafood House—Pennsylvania, Inc.

Landry’s Seafood House—San Luis, Inc.

Landry’s Seafood House—Redondo Beach, Inc.

Landry’s Seafood House—South Carolina, Inc.

Landry’s Seafood House—Virginia, Inc.

Landry’s Seafood House—Utah, Inc.

Landry’s Seafood Inn & Oyster Bar, Inc.

Landry’s Seafood Inn & Oyster Bar—Galveston, Inc.

Landry’s Seafood Inn & Oyster Bar—Kemah, Inc.

Landry’s Seafood Inn & Oyster Bar—San Antonio, Inc.

Landry’s Seafood Inn & Oyster Bar—Sugar Creek, Inc.

Landry’s Seafood Kemah, Inc.

Landry’s Seafood & Steak House—Corpus Christi, Inc.

LCH Acquisition, Inc.

LCHLN, Inc.

LNY-Iowa, Inc.

LSRI Holdings, Inc.

Marina Acquisition Corporation of Florida, Inc.

Ocean Blue Industries, Inc.

Nevada Aquarium, Inc.

Rainforest Cafe, Inc.

Rainforest Cafe, Inc.—Baltimore County

Rainforest Cafe, Inc.—Cha Cha

Rainforest Cafe, Inc.—Kansas

Rainforest Cafe, Inc.—Lightening

Rainforest Cafe Canada Holdings, Inc.

Rainforest Trademark, Inc.

Salt Grass Private Club, Inc.

Saltgrass, Inc.

Saltgrass Steakhouse Private Club, Inc.

Saltgrass Beverages #20, Inc.

Saltgrass Beverages #22, Inc.

Saltgrass Beverages 24 Private Club, Inc.

SGSH Private Club—Lewisville, Inc.

Saltgrass Steakhouse 10 Private Club

SGSH Private Club—Mesquite, Inc.

Seafood Holding Supply, Inc.

Summit Aircraft Services, Inc.

Summit Seafood Supply, Inc.

Summit Supply, Inc.

WSI Fish Limited

West End Seafood, Inc.

Westheimer Seafood, Ltd.

Willie G’s Galveston, Inc.

Willie G’s Post Oak, Inc.

Yorkdale Rainforest Restaurants, Inc.

EX-23.1

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference of our report dated February 11, 2004, with respect to the consolidated financial statements of Landry’s Restaurants, Inc. (“the Company”) included in the Annual Report on Form 10-K for the year ended December 31, 2003 into the following:

I. The Company’s Registration Statement on Form S-3 (No. 333-75886) relating to the Company’s shelf registration statement.

II. The Company’s Registration Statement on Form S-8 (No. 333-93173) relating to the Company’s Amended and Restated 1995 Flexible Incentive Plan.

III. The Company’s Registration Statement on Form S-8 (No. 333-02862) relating to the Company’s Stock Option Plan.

IV. The Company’s Registration Statement on Form S-8 (No. 333-02854) relating to the 1995 Flexible Spending Plan.

V. The Company’s Registration Statement on Form S-8 (No. 033-81007) relating to the 1993 Stock Option Plan.

VI. The Company’s Registration Statement on Form S-8 (No. 033-76500) relating to the 1993 Stock Option Plan and Nonqualified Formula Stock Option Plan for Non-Employee Directors.

/s/ Ernst & Young LLP

Houston, Texas

March 9, 2004

EX-31.1

EXHIBIT 31.1

CERTIFICATION WITH RESPECT TO ANNUAL REPORT OF

LANDRY’S RESTAURANTS, INC.

I, Tilman J. Fertitta, certify that:

1. I have reviewed this annual report on Form 10-K of Landry’s Restaurants, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2004

/S/ Tilman J. Fertitta

Tilman J. Fertitta

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION WITH RESPECT TO ANNUAL REPORT OF

LANDRY’S RESTAURANTS, INC.

I, Paul S. West, certify that:

1. I have reviewed this annual report on Form 10-K of Landry’s Restaurants, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2004

/S/    Paul S. West

Paul S. West

Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION WITH RESPECT TO ANNUAL REPORT OF

LANDRY’S RESTAURANTS, INC.

The undersigned, being the chief executive officer and chief financial officer of Landry’s Restaurants, Inc. (the “Company”), in compliance with 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, do hereby certify that to each of their respective knowledge with respect to the Annual Report of the Company on Form 10-K as filed with the Securities and Exchange Commission on March 9, 2004 (the “Report”):

1. that the Report fully complies with all requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

2. that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 9, 2004

/S/    Tilman J. Fertitta

Tilman J. Fertitta

Chairman of the Board, President and

Chief Executive Officer

/S/    Paul S. West

Paul S. West

Executive Vice President and

Chief Financial Officer