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, 2006

¨ 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:

Common Stock, par value $.01 per Share	New York Stock Exchange
(Title of Class)	(Name of Exchange on Which Registered)

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

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ¨            No x

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 ¨            No x

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. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large accelerated filer ¨            Accelerated filer x            Non-accelerated filer ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨            No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨            No x

Aggregate market value of voting stock held by non-affiliates of the Registrant as of June 30, 2006. $532,700,000.

As of July 31, 2007, there were 19,352,203 shares of the registrant’s common stock outstanding.

LANDRY’S RESTAURANTS, INC.

TABLE OF CONTENTS

		Page No.
PART I.		1
Item 1.	Business	1
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	20
Item 4.	Submission of Matters to a Vote of Security Holders	21
PART II.		22
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 8.	Financial Statements and Supplementary Data	35
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	35
Item 9A.	Controls and Procedures	35
Item 9B.	Other Information	36
PART III.		37
Item 10.	Directors, Executive Officers and Corporate Governance	37
Item 11.	Compensation Discussion and Analysis	42
Item 12.	Security Ownership of Certain Beneficial Holders and Management	60
Item 13.	Certain Relationships and Related Transactions	62
Item 14.	Principal Accountant Fees and Services	63
PART IV.		66
Item 15.	Exhibits and Financial Statement Schedules	66
SIGNATURES		110
EXHIBIT INDEX		111

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Explanatory Note

In light of published reports concerning the pricing of stock options and the timing of stock option grants at numerous other companies, in 2006, we undertook a voluntary internal review of our past practices in connection with grants of stock options. The voluntary review was overseen by our Board of Directors, including our independent directors. The Board engaged legal counsel, which in turn engaged a forensic accounting expert to assist with the review. The voluntary review did not find any intentional backdating of options. The review found administrative errors and that the granting process for certain stock option grants had not been complete, resulting in incorrect measurement dates for certain stock option awards. In addition, the review found certain accounting errors which needed to be corrected.

Our Board of Directors formed a Special Litigation Committee of independent directors to commence an investigation of our past stock option granting practices and related accounting issues from the time of our initial public offering to the present. After completion of our own internal review, we requested the Special Litigation committee conduct an independent review of our option granting practices. The Special Committee was composed of the members of the Audit Committee of the Board of Directors. The Special Committee retained the law firm of King & Spalding LLP as its independent legal counsel and UHY Advisors FLVS, Inc. as forensic accountant to aid in the investigation.

In connection with this investigation by the Special Committee, we voluntarily informed the SEC of our inquiry into our historical option granting practices. On August 3, 2007, the SEC informed us that it was terminating this matter and that it would not be recommending any action.

The Special Committee did determine that there were some deficiencies in the administration and oversight of the stock option grant processes and found that certain grants probably did not occur on the dates reflected in the minutes.

At the conclusion of the Special Committee’s investigation on July 30, 2007, the Special Committee reported its findings and conclusions to the Board. The Special Committee made no finding of fraud by any current or former officer or director. The Special Committee did not conclude that the incorrect dating of stock options grants or the other deficiencies in the determination of and accounting for stock options grants were the result of intentional misconduct or were for the purpose of generating false financial statements. The Special Committee concluded that the stock option prices during the period reviewed were characterized by a pervasive lack of formality: inattention to legal and plan requirements; failure to adopt and implement consistent practices; and inordinate delays. As a result, certain options were granted in the money. The Special Committee did not recommend termination of any member of senior management or resignations of any directors. Moreover, some members of senior management have agreed to repay the difference between their options price and the price determined by the Special Committee to be the correct measurement date price. The Compensation Committee will determine the appropriate method for this repayment.

Although we have not issued any stock options since 2004, we have changed our option granting approval policies and procedures and will be implementing further changes to comply with the recommendations and conclusions of the Special Committee, including changes to centralize records and make sure documentation is accurately and timely prepared and that grants are made at regularly scheduled times.

Primarily due to not knowing the financial impact of the Special Committee’s investigation, we were unable to timely file this annual report on Form 10-K and the quarterly report on Form 10-Q for the quarter ended March 31, 2007.

Based on the revised measurement dates, the Company recorded an aggregate non-cash, after tax charge of $10.9 million for the period from 1993 to 2005. The financial statement impact for the years 2002 through 2005 was not material to any period. Therefore, in this Form 10-K, we recorded a non-cash after tax charge of $1.8

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million in the fourth quarter of 2006. The December 31, 2003 balance of additional paid-in capital was increased $9.1 million with a corresponding decrease to retained earnings to reflect the cumulative effect from prior years. The effect in each of the years 1993 to 2001 is set fourth in Note 2 of the Notes to Consolidated Financial Statements.

In March 2007, we received notice from the Indenture Trustee of our $400.0 million 7.5% Senior Notes that in the Indenture Trustee’s opinion, our failure to file a 10K Report for the fiscal year ending December 31, 2006, was an event of default under the Indenture. We contested the appropriateness of the Indenture Trustee’s notice at that time. On July 24, 2007, we received a further notice from the Indenture Trustee, stating that acting upon a direction of a majority of the Senior Noteholders, it had accelerated the unpaid principal, premium, if any, and unpaid interest on all Senior Notes outstanding. We have obtained a temporary restraining order in U.S. District Court requiring the Indenture Trustee to rescind the attempted acceleration pending a preliminary injunction hearing on August 16, 2007.

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FORWARD LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “believes,” “estimates,” “expects,” “intends” and other similar expressions. 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:

• potential acquisitions of other restaurants, gaming operations and lines of businesses in other sectors of the hospitality and entertainment industries;

• future capital expenditures, including the amount and nature thereof;

• potential divestitures of restaurants, restaurant concepts and other operations or lines of business,

• business strategy and measures to implement such 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, hotels and casinos;

• the effect of changes in tax laws;

• actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to our business and the impact of any such actions;

• our ability to maintain regulatory approvals for our existing businesses and our ability to receive regulatory approval for our new businesses;

• our expectations of the continued availability and cost of capital resources;

• effect of the attempt to accelerate certain outstanding debt;

• 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; and

• the risks described in “Risk Factors.”

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 our 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. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described under Item 1A. “Risk Factors” and elsewhere in this report, or in the documents incorporated by reference herein. We assume no obligation to modify or revise any forward looking statements to reflect any subsequent events or circumstances arising after the date that the statement was made.

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LANDRY’S RESTAURANTS, INC.

PART I.

ITEM 1.    BUSINESS

General

We are a national, diversified restaurant, hospitality and entertainment company principally engaged in the ownership and operation of full-service, casual dining restaurants, primarily under the names of Rainforest Cafe, Saltgrass Steak House, Landry’s Seafood House, The Crab House, Charley’s Crab and The Chart House. As of December 31, 2006, we owned and operated over 179 full-service and certain limited-service restaurants in 29 states. Our portfolio of restaurants consists of a broad array of formats, menus and price-points that appeal to a wide range of markets and customer tastes. We offer concepts ranging from upscale steak and seafood restaurants to casual theme-based restaurants. We are also engaged in the ownership and operation of select hospitality businesses including hotel and casino resorts that provide our customers with unique dining, leisure and entertainment experiences, including the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada.

We opened the first Landry’s Seafood House restaurant in 1980. In 1993, we became a public 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 (“Joe’s”) 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. In October 2002, we purchased 27 Texas-based Saltgrass Steak House restaurants. In September 2005, we acquired the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada (“Golden Nugget”). In February 2006, we acquired 80% of T-Rex Cafe, Inc. (“T-Rex”) from Schussler Creative, Inc. (SCI) and committed to the construction of at least four restaurants, two of which are to be located at high profile Disney properties.

During the third quarter of fiscal 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s units. In November 2006, we completed the sale of 120 Joe’s restaurants to a non-affiliated entity, JCS Holdings, LLC, a newly formed entity created by J.H. Whitney Capital Partners, LLC.

We will continue to add to our base of restaurants, opening primarily Saltgrass Steak House and Signature Group restaurants (defined below). The majority of our remaining 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. In addition, we plan to selectively pursue other hospitality businesses that are complementary to our current operations.

Core Restaurant Concepts

Our portfolio of restaurant concepts consist of a variety of formats ranging from upscale steak and seafood restaurants to casual theme-based restaurants, each providing our guests with a distinct dining experience.

We currently operate our restaurants through the following divisions:

• the Landry’s Division, our high-profile seafood and signature restaurants;

• Rainforest Cafe, our rainforest-themed casual dining restaurants and;

• Saltgrass Steak House, our Texas-Western themed casual dining restaurants.

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Landry’s Division.    The Landry’s Division is comprised of Landry’s Seafood House, The Crab House, Chart House and C.A. Muer restaurants and a few distinct concept restaurants that offer an upscale dining experience in a unique and memorable setting that we call our Signature Group. Our Signature Group of restaurants includes Grotto, Pesce, Vic & Anthony’s Steakhouse, Willie G’s Seafood and Steak House, La Griglia and Brenner’s Steakhouse.

• Landry’s Seafood House.    Landry’s Seafood House is a full-service traditional Gulf Coast seafood restaurant. 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 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 $15.99 to $30.99, with certain items offered at market price. Lunch entrees range from $8.99 to $17.99. During the year ended December 31, 2006, alcoholic beverage sales accounted for approximately 19% of the concept’s total restaurant revenues.

• The Crab House.    The Crab House is a full-service casual dining seafood restaurant with a casual nautical theme. Many of our The Crab House restaurants feature a fresh seafood salad bar. Dinner entree prices range from $14.99 to $26.99, with certain items offered at market price. Lunch entrees range from $8.99 to $14.99. During the year ended December 31, 2006, alcoholic beverage sales accounted for approximately 14% of the concept’s total restaurant revenues.

• Chart House and C.A. Muer.    The Chart House restaurants and C.A. Muer restaurants, which include restaurants under several trade names, primarily Charley’s Crab, 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 waterfront 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 the Chart House and Charley’s Crab 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 $17.99 to $42.99. Charley’s Crab dinner entree prices range from $17.00 to $39.99, with lunch entree prices ranging from $11.99 to $26.99. During the year ending December 31, 2006, alcoholic beverage sales accounted for approximately 23% of the Chart House restaurant revenues and 21% of the C.A. Muer total restaurant revenues.

Rainforest Cafe.    The Rainforest Cafe restaurants provide full-service casual dining in a visually and audibly stimulating and entertaining rainforest-themed environment that appeal 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 active wildlife. In the retail village, we sell complementary apparel, toys and gifts with the Rainforest Cafe logo in addition to other items reflecting the rainforest theme. Entree prices range from $8.99 to $22.99. During the year ended December 31, 2006, retail sales and alcoholic beverage sales accounted for approximately 22% of the concept’s total restaurant revenues. Rainforest Cafe restaurants typically are larger units and generate higher unit volumes than restaurants in our other concepts, and have operating profit margins that are comparable to our other restaurants.

Saltgrass Steak House.    The Saltgrass Steak House restaurants offer 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. Menu options extend from filet mignon to chicken fried steak to fresh fish to grilled chicken breast. Dinner entree prices range from $7.99 to $25.99 and lunch prices range from $7.99 to $14.99. During the year ended December 31, 2006, alcoholic beverage sales accounted for approximately 12% of the concept’s total restaurant revenues.

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Specialty Growth Division

Our Specialty Growth Division consists of hospitality and amusement properties that provide ancillary revenue streams and opportunities complementary to our core restaurant business. The Specialty Growth Division includes the following properties:

Kemah Boardwalk—Galveston County, Texas.    Our Specialty Growth Division commenced operations with the opening in 1999 of the Kemah Boardwalk, our owned amusement, entertainment and retail complex located on approximately 40 acres in Galveston County’s Kemah, Texas. The Kemah Boardwalk has multiple attractions; including specialty retail shops, a boutique hotel, a marina, and carnival-style rides and games. The Kemah Boardwalk’s activities are based upon and complementary to the business and traffic generated at our eight wholly owned and operated high-volume restaurants situated at that location, which include units from most of our core restaurant concepts described above as well as the original Aquarium Restaurant.

Downtown Aquarium—Houston, Texas.    The Downtown Aquarium in Houston, Texas opened in 2003. The Downtown Aquarium features our second Aquarium Underwater Dining Adventure restaurant. In addition, the Downtown Aquarium also features a public aquarium complex with over 200 species of fish, a giant acrylic shark tank, dancing water fountains, a mini-amusement park and a bar/lounge.

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, which is wholly owned and operated, and is home to over 500 species of fish, was built by a non-profit organization in 1999 at a cost of approximately $93.0 million. We purchased this ongoing aquarium enterprise in federal bankruptcy proceedings for $13.6 million with no outstanding debt or other obligations. Upon assumption of ownership, we reduced the complex’s workforce, keeping personnel necessary for ongoing operations and significantly reduced corporate overhead. We opened an up-scale Aquarium Restaurant in 2005, which transformed the aquarium into a recreational destination, and renamed the facility, adding a second Downtown Aquarium to the Specialty Growth Division.

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 our development of the Galveston Island Convention Center. The convention center is housed on a 26-acre beachfront locale. The facility accommodates 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 is owned by the City of Galveston and managed and operated by us.

Holiday Inn on the Beach—Galveston, Texas.    In 2003, we acquired the Holiday Inn on the Beach, a 180 room beachfront resort hotel located along Galveston’s seawall and near the new Galveston Island Convention Center. This property is wholly owned and operated by us.

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. The hotel offers 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, and our own Downtown Aquarium. The hotel is wholly owned and operated by us.

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. Upon expiration of the existing lease, we plan to transform the hotel into a 1800s-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.

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Tower of the Americas—San Antonio, Texas.    In 2004, we entered into a 15-year lease agreement with the City of San Antonio to renovate and operate the 750-foot landmark Tower of the Americas, a major tourist attraction in San Antonio. In the summer of 2006 this redevelopment culminated in the opening of Eyes Over Texas, an upscale revolving restaurant, an open air observation deck at the top of the tower, and a Texas-themed 4-D “multi-sensory” theater on the ground level.

T-Rex Cafe.    In February 2006, we acquired 80% of T-Rex Cafe, Inc. (“T-Rex”). T-Rex is a unique concept that features an interactive prehistoric environment with life-size animatronic dinosaurs. Under the agreement, we guaranteed the funding for the construction, development and pre-opening of at least three T-Rex Cafes, the first of which opened in July 2006 in Kansas City. The next unit is expected to open in 2008 at Downtown Disney World.

Yak &Yeti.    In February 2006, we also acquired the majority interest in a new Asian themed eatery which is expected to open in Disney’s Animal Kingdom Theme Park in 2007. In a setting reminiscent of a rural Himalayan village, the Asian-Fusion concept will offer both full-service table dining and quick service food as well as feature a retail component offering Asian goods ranging from Sushi plates to chopsticks and fine teapots.

Gaming Division

In 2005, we acquired the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nevada. We believe that the Golden Nugget brand name is one of the most recognized in the gaming industry and we expect to continue to capitalize on the strong name recognition and high level of quality and value associated with it. Demonstrating a long-standing commitment to quality and service, the Golden Nugget—Las Vegas has received the prestigious AAA Four Diamond Award for thirty consecutive years, which is a record for any lodging establishment in Nevada. Presented by the American Automobile Association, a North American motoring and leisure travel organization, the 2007 award was given to only 19 Nevada hotels of the approximately 50,000 eligible lodging establishments in the United States evaluated by the AAA. According to the AAA, establishments that receive the AAA Four Diamond Award are upscale in all areas and offer an extensive array of amenities and a high degree of hospitality, service and attention to detail.

Our business strategy is to create the best possible gaming and entertainment experience for our customers by providing a combination of comfortable and attractive surroundings with attentive service from friendly, experienced employees. We target out-of-town customers at both of our properties while also catering to the local customer base. We believe that the Golden Nugget—Las Vegas is the leading downtown destination for our out-of-town customers. The property offers the same complement of services as our Las Vegas Strip competitors, but we believe that our customers prefer the boutique experience we offer and the downtown environment. We emphasize the property’s wide selection of amenities to complement guests’ gaming experience and provide a luxury room product and personalized services at an attractive value. At the Golden Nugget—Laughlin, we focus on providing a high level of customer service, a quality dining experience at an appealing value, a slot product with highly competitive pay tables and a superior player rewards program.

Strategy

Our objective is to develop and operate a diversified restaurant, hospitality and entertainment company offering customers unique dining, leisure and entertainment experiences. We believe that this strategy creates a loyal customer base, generates a high level of repeat business and provides superior returns to our investors. By focusing on high-quality food, superior value and service, and the ambiance of our locations, 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 an attractive price-value relationship.    Our restaurants, hospitality and gaming facilities provide customers an attractive price-value relationship by serving generous portions

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with fresh ingredients in high-quality meals in comfortable and attractive surroundings with attentive service at reasonable prices.

• Commitment to customer satisfaction.    We provide our customers prompt, friendly and efficient service, keeping table-to-wait staff ratios low, providing a quality product, personalized service and staffing each operating unit 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, 2006, we had 70 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 unit management and our 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. Through our cash bonus program, our restaurant managers typically earn bonuses equal to 15% to 25% of their total cash compensation.

• Expansion of our core restaurant concepts.    We believe we have demonstrated the viability of our restaurant concepts in a wide variety of markets across the United States. 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 as well as expanding into new markets. 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, securing appropriate local governmental permits and approvals, obtaining adequate sources of capital and by our ability to supervise construction, recruit and train management personnel, and achieve or exceed targeted financial results and returns.

• 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 and the Golden Nugget Casinos and Hotels in 2005. We continuously evaluate attractive acquisition opportunities and, at any given time, may be engaged in discussions with respect to possible material acquisitions, business combinations or investments in the restaurant, hospitality, amusement, entertainment (including gaming), food service, facilities management or other related industries.

The following is a summary of our major acquisitions:

Rainforest Cafe (2000).    Since our acquisition of Rainforest Cafe, we have focused on stabilizing this concept’s operations. We have closed unprofitable locations, renegotiated leases, reduced general and administrative expenses and refreshed the concept’s menu with proven menu items from our other concepts. Overall sales trends at Rainforest Cafe units at tourist destinations have improved, resulting in positive comparative sales for 2006.

Chart House and C.A. Muer (2002).    The Chart House and C.A. Muer restaurant acquisitions enabled us 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 remodeled many of these units, freshening and updating

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the look of these venues. In addition, these restaurants have undergone menu evaluations and re-engineering in order for us to feature successful dishes from previous menus side-by-side with bold, fresh ideas from our culinary experts. The remodeling and menu changes have been met with favorable results as evidenced by strong sales trends. No significant near-term expansion of these concepts is currently planned, and future growth will be dependent upon profitability and unit economics.

Saltgrass Steak House (2002).    The nearly seamless integration of Saltgrass Steak House restaurants 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 our point-of-sale system and also implementation of our profitability and labor/payroll programs. Since the acquisition, we have expanded the concept, opening two new steak houses in 2003, four in 2004, two in 2005 and five in 2006. Also, in 2006 we initiated a plan to convert a number of Joe’s Crab Shack restaurants into Saltgrass Steak Houses and we also opened our first unit outside of Texas. Further expansion of this concept into our existing markets and development of new markets is planned in 2007.

Golden Nugget (2005).    The Golden Nugget acquisition allowed us to enter the gaming business with one of the most recognized brands in the industry and in the preeminent gaming city, Las Vegas, Nevada. We also acquired the Golden Nugget property in Laughlin, Nevada.

In 2005, we initiated a major renovation and expansion of the Las Vegas property designed to create additional excitement, improved amenities and dining options while maintaining the warmth and high level of personalized service for which the Golden Nugget is known. The first phase of the renovation was completed in 2006 and included opening a new spa, buffet, swimming pool, lounge, poker room, race and sports book and showroom. We also replaced several existing casino restaurants with restaurants from our existing portfolio of concepts. The second phase of the renovation will include the completion of a new event center, nightclub and an expansion of the gaming floor. The Golden Nugget Las Vegas occupies approximately eight acres in downtown Las Vegas with approximately 42,000 square feet of gaming area. The property also features three towers containing 1,907 rooms, the largest number of guestrooms in downtown Las Vegas, approximately 1,153 slot machines and 59 table games. The Golden Nugget—Laughlin has approximately 32,000 square feet of gaming space, 996 slot machines, 14 table games and 300 hotel rooms.

T-Rex (2006).    In February 2006, we acquired 80% of T-Rex Cafe, Inc. (“T-Rex”) and committed to the construction of at least four restaurants, two of which are to be located at high profile Disney properties.

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 Steak House 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.

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The following table enumerates by state the location of our restaurants as of December 31, 2006:

State	Number of Units	State	Number of Units
Alabama	2	Missouri	2
Arizona	2	Nevada	8
California	14	New Jersey	5
Colorado	7	New Mexico	1
Connecticut	1	New York	1
Florida	21	Ohio	3
Georgia	1	Oklahoma	1
Illinois	5	Oregon	1
Kansas	2	Pennsylvania	2
Kentucky	1	South Carolina	4
Louisiana	3	Tennessee	2
Maryland	2	Texas	72
Massachusetts	2	Virginia	1
Michigan	8	Washington	1
Minnesota	3	Toronto, Canada	1
		Total	179

We own and operate the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nevada.

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 eight restaurants (included in the table above), a hotel, retail shops, amusement attractions, and a marina.

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

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 operating units with management that has experience in our 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, wait staff, hotel staff and casino employees to take great pride serving our customers in accordance with our high standards. Managers and staff are trained to be courteous and attentive to customer needs, and the managers, in particular, are instructed to regularly visit with customers. Senior corporate management hosts weekly meetings with our general managers to discuss individual unit

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performance and customer comments. Moreover, we require general managers to hold weekly meetings at their individual operating units. 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 typically 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 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, 2006, there were approximately 46 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, 2006, in the restaurant division, we employed approximately 17,000 persons, of whom 1,264 were restaurant managers or manager-trainees, 307 were salaried corporate and administrative employees, approximately 46 were operations regional management employees, 25 were development and construction employees and the rest were hourly employees. Typical restaurant employment for us is at a seasonal low at December 31, and may increase 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. We believe that our management level employee turnover for 2006 was within industry standards.

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In the Gaming Division, we employed approximately 3,055 persons, of whom 276 were management, 355 were salaried employees and the rest were hourly employees. Approximately 1,377 employees are covered by collective bargaining agreements at our Golden Nugget Hotel and Casino in Las Vegas, Nevada.

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 operating unit with an experienced management team to ensure attentive customer service and consistently high food quality as well as providing an excellent room and gaming experience. 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 one national distributor in order to achieve certain cost efficiencies, although such services are available from alternative qualified distributors. We have not experienced any significant delays in receiving our food and beverage products, restaurant supplies or equipment.

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 through television and radio commercials, billboards, travel and hospitality magazines, print advertising and newspaper drops. Our advertising expenditures for 2006 were approximately 2.8% of revenues from continuing operations. We expect to cross market our restaurant, hospitality and gaming locations to leverage our advertising spend. We anticipate that future advertising and marketing expenses will decrease slightly as a percentage of revenues due to the sale of the 120 Joe’s Crab Shack units which relied heavily on television marketing.

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Service Marks

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

Competition

The restaurant, hospitality and entertainment industries are intensely competitive with respect to price, service, the type and quality of product offered, location and other factors. We compete with both locally owned facilities, as well as national and regional 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, hospitality and gaming, and retail establishments for real estate sites, personnel and acquisition opportunities.

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

We believe our business units 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, Mexico, Canada, Egypt and Turkey. There are eight international units, including seven franchised units and one Company owned and operated unit in Toronto, Canada. The Egyptian and Turkey units are expected to open in 2007. We have signed agreements for four additional units in the Middle East over the next four years. 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 two reportable industry segments: restaurant and hospitality and gaming operations.

ITEM 1A.    RISK FACTORS

Because of the following factors, as well as other variables affecting our operating results and financial condition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

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.

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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, as many of our existing restaurants are 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 property and business interruption insurance, we carry large deductibles, and 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, or that property and business interruption insurance would adequately reimburse us for our losses.

Moreover, in response to higher insurance costs for our property and casualty coverage due to our large concentration of coastal properties, we significantly reduced our aggregate insurance policy limits and purchased individual windstorm policies for the majority of our operating units located along the Texas gulf coast. Although, we have never had an insurance claim in excess of our existing coverage, there is no assurance that we will have adequate insurance coverage to recover losses that may result from a catastrophic event.

Our gaming activities rely heavily on certain markets, and changes adversely impacting those markets could have a material adverse effect on our gaming business.

The Golden Nugget properties are both located in Nevada and, as a result, our gaming business is subject to greater risks than a more diversified gaming company. These risks include, but are not limited to, risks related to local economic and competitive conditions, changes in local and state governmental laws and regulations (including changes in laws and regulations affecting gaming operations and taxes) and natural and other disasters. Any economic downturn in Nevada or any terrorist activities or disasters in or around Nevada could have a significant adverse effect on our business, financial condition and results of operations. In addition, there can be no assurance that gaming industry revenues in, or leisure travel to and throughout, Nevada or the surrounding local markets will continue to grow.

We also draw a substantial number of customers from other geographic areas, including southern California, Hawaii and Texas. A recession or downturn in any region constituting a significant source of our customers could result in fewer customers visiting, or customers spending less at, the Golden Nugget properties, which would adversely affect our results of operations. Additionally, there is one principal interstate highway between Las Vegas and southern California, where a large number of our customers reside. Capacity restraints of that highway or any other traffic disruptions may affect the number of customers who visit our facilities.

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.

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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.

We use significant amounts of electricity, natural gas and other forms of energy, and energy price increases may adversely affect our results of operations.

We use significant amounts of electricity, natural gas and other forms of energy. While no shortages of energy have been experienced, any substantial increases in the cost of electricity and natural gas in the United States will increase our cost of operations, which would negatively affect our operating results. The extent of the impact is subject to the magnitude and duration of the energy price increases, but this impact could be material. In addition, higher energy and gasoline prices affecting our customers may increase their cost of travel to our hotel-casinos and result in reduced visits to our properties and a reduction in our revenues.

The restaurant, hospitality and gaming industries are particularly affected by trends and fluctuations in demand and are highly competitive. If we are unable to successfully surmount these challenges, our business and results of operations could be materially adversely affected.

Restaurant Industry

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.

Gaming Industry

The United States gaming industry is intensely competitive and features many participants, including many world class destination resorts with greater name recognition, different attractions, amenities and entertainment options than our facilities. In a broader sense, gaming operations face competition from all manner of leisure and entertainment activities.

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Our competitors have more gaming industry experience, and many are larger and have significantly greater financial, selling and marketing, technical and other resources. Our competitors include multinational corporations that enjoy widespread name recognition, established brand loyalty, decades of casino operation experience and a diverse portfolio of gaming assets.

We face ongoing competition as a result of the upgrading or expansion of facilities by existing market participants, the entrance of new gaming participants into a market or legislative changes. Certain states have recently legalized, and several other states are currently considering legalizing, casino gaming in designated areas. Legalized casino gaming in these states and on Indian reservations would increase competition and could adversely affect any future gaming operations.

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 a moderate and 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.

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.

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The expansion of our business through acquisitions poses risks that may reduce the benefits we anticipate and could harm our business and our financial condition.

We have historically been, and we expect to continue to be, an active acquirer of restaurants, hospitality and entertainment properties and other related businesses. Part of our strategy involves acquisitions of restaurants and restaurant concepts and businesses involved in the hospitality, amusement and entertainment (including gaming) industries designed to expand and enhance our core operations. We have evaluated and expect to continue to evaluate possible acquisition and investment transactions on an ongoing basis and, at any given time, may be engaged in discussions with respect to possible acquisitions, business combinations or investments. Certain of these transactions, if consummated, could be material to our operations and financial condition.

Our ability to benefit from acquisitions depends on many factors, including our ability to identify acquisition prospects, access capital markets at an acceptable cost of capital, negotiate favorable transaction terms and successfully integrate any businesses we acquire. Integrating businesses we acquire into our operational framework may involve unanticipated delays, costs and other operational problems. If we encounter unexpected problems with one of our acquisitions or alliances, our senior management may be required to divert attention away from other aspects of our businesses to address these problems. Acquisitions also pose the risk that we may be exposed to successor liability relating to actions by an acquired company and its management before the acquisition. The due diligence we conduct in connection with an acquisition, and any contractual guarantees or indemnities that we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities. A material liability associated with an acquisition could adversely affect our reputation and results of operations and reduce the benefits of the acquisition.

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

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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.

We conduct licensed gaming operations in Nevada, and various regulatory authorities, including the Nevada State Gaming Control Board and the Nevada Gaming Commission, require us to hold various licenses and registrations, findings of suitability, permits and approvals to engage in gaming operations and to meet requirements of suitability. These gaming authorities also control approval of ownership interests in gaming operations. These gaming authorities may deny, limit, condition, suspend or revoke our gaming licenses, registrations, findings of suitability or the approval of any of our ownership interests in any of the licensed gaming operations conducted in Nevada, any of which could have a significant adverse effect on our business, financial condition and results of operations, for any cause they may deem reasonable. If we violate gaming laws or regulations that are applicable to us, we may have to pay substantial fines or forfeit assets. If, in the future, we operate or have an ownership interest in casino gaming facilities located outside of Nevada, we may also be subject to the gaming laws and regulations of those other jurisdictions.

If additional gaming regulations are adopted or existing ones are modified in Nevada, those regulations could impose significant restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals are introduced in the federal and Nevada state and local legislatures that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and our business. Legislation of this type may be enacted in the future. If there is a material increase in federal, state or local taxes and fees, our business, financial condition and results of operations could be adversely affected.

Our officers, directors and key employees are required to be licensed or found suitable by gaming authorities and the loss of, or inability to obtain, any licenses or findings of suitability may have a material adverse effect on us.

Our officers, directors and key employees are required to file applications with the gaming authorities in the State of Nevada, Clark County, Nevada and the City of Las Vegas and are required to be licensed or found suitable by these gaming authorities. If any of these gaming authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. Furthermore, the gaming authorities may require us to terminate the employment of any person who refuses to file the appropriate applications. Either result could significantly impair our gaming operations.

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.

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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, Egypt and Turkey. These agreements include a per unit development fee and restaurant royalties ranging from 3% to 7% of revenues. There are nine international units; 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, Rainforest Cafe, Charley’s Crab, Saltgrass Steak House, Chart House and Golden Nugget are each registered as a federal service mark on the Principal Register of the United States Patent and Trademark Office. The Crab House is a registered design mark. 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 or adverse results 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.

In connection with certain of our discontinued operations, we remain the guarantor or assignor under a number of leased locations. In the event of future defaults under any of such leased locations we may be responsible for significant damages to existing landlords which may materially affect our 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 businesses 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.

Labor shortages or increases in labor costs could slow our growth or harm our business.

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including regional operational managers and regional chefs, restaurant general managers, executive chefs and casino employees, necessary to continue our operations and keep pace with our growth. Qualified

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individuals that we need to fill these positions are in short supply and competition for these employees is intense. If we are unable to recruit and retain sufficient qualified individuals, our business and our growth could be adversely affected. Additionally, competition for qualified employees could require us to pay higher wages, which could result in higher labor costs. If our labor costs increase, our results of operations will be negatively affected.

Health concerns relating to the consumption of seafood, beef and other food products could affect consumer preferences and could negatively impact our results of operations.

Consumer food preferences could be affected by health concerns about the consumption of various types of seafood, beef or chicken. In addition, negative publicity concerning food quality or possible illness and injury resulting from the consumption of certain types of food, such as negative publicity concerning the levels of mercury or other carcinogens in certain types of seafood, e-coli, “mad cow” and “foot-and-mouth” disease relating to the consumption of beef and other meat products, “avian flu” related to poultry products and the publication of government, academic or industry findings about health concerns relating to food products served by any of our restaurants could also affect consumer food preferences. These types of health concerns and negative publicity concerning the food products we serve at any of our restaurants may adversely affect the demand for our food and negatively impact our results of operations.

In addition, we cannot guarantee that our operational controls and employee training will be effective in preventing food-borne illnesses, such as hepatitis A, and other food safety issues that may affect our restaurants. Food-borne illness incidents could be caused by food suppliers and transporters and, therefore, would be outside of our control. Any publicity relating to health concerns or the perceived or specific outbreaks of food-borne illnesses or other food safety issues attributed to one or more of our restaurants, could result in a significant decrease in guest traffic in all of our restaurants and could have a material adverse effect on our results of operations. We face the risk of litigation in connection with any outbreak of food-borne illnesses or other food safety issues at any of our restaurants. If a claim is successful, our insurance coverage may not be adequate to cover all liabilities or losses and we may not be able to continue to maintain such insurance, or to obtain comparable insurance at a reasonable cost, if at all. If we suffer losses, liabilities or loss of income in excess of our insurance coverage or if our insurance does not cover such loss, liability or loss of income, there could be a material adverse effect on our results of operations.

Expanding our restaurant base by opening new restaurants in existing markets could reduce the business of our existing restaurants.

Our growth strategy includes opening restaurants in markets in which we already have existing restaurants. We may be unable to attract enough customers to the new restaurants for them to operate at a profit. Even if we are able to attract enough customers to the new restaurants to operate them at a profit, those customers may be former customers of one of our existing restaurants in that market and the opening of new restaurants in the existing market could reduce the revenue of our existing restaurants in that market.

Restaurant companies have been the target of class actions and other lawsuits alleging, among other things, violation of federal and state law.

We are subject to a variety of claims arising in the ordinary course of our business brought by or on behalf of our customers or employees, including personal injury claims, contract claims, and employment-related claims. In recent years, a number of restaurant companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace, employment and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. We are currently defending purported collective and class action lawsuits alleging violations, among other things, of minimum wage and overtime provisions of federal and state labor laws. Regardless of whether any claims against us are valid or whether we are ultimately determined to be liable, claims may be expensive to defend and

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may divert time and money away from our operations and hurt our performance. A judgment for any claims could materially adversely affect our financial condition or results of operations (especially if there is no insurance coverage), and adverse publicity resulting from these allegations may materially adversely affect our business. We offer no assurance that we will not incur substantial damages and expenses resulting from lawsuits, which could have a material adverse effect on our business.

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.

Certain holders of our Senior Notes have attempted to accelerate our Senior Notes. If we are unsuccessful in showing that the attempted acceleration is inappropriate and also unsuccessful in curing such attempted acceleration, obtaining alternative financing in the current credit market could materially adversely affect our business and results of operations.

The Indenture Trustee of our Senior Notes notified us that due to our inability to file our fiscal year end December 31, 2006 10K Report, the Indenture Trustee, acting upon a direction of holders of a majority of Senior Noteholders, had accelerated the $400.0 million of unpaid principal, premium if any, and unpaid interest on all outstanding Senior Notes. We have obtained a temporary restraining order in U.S. District Court requiring the Indenture Trustee to rescind the attempted acceleration pending a preliminary injunction hearing on August 16, 2007.

If we are unsuccessful in permanently rescinding the acceleration, we may be required to obtain alternative financing during this period of credit market disruption which will likely result in higher interest rates and more restrictive terms than could be obtained in a stable market and the resulting higher interest expense could have a materially adverse effect on our business and results of operations, as well as our acquisition strategy.

The capital costs of our specialty growth and gaming divisions 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 our specialty growth and gaming divisions, we incur significant capital expenditures. As a result, the failure of one or more of these projects could have 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.

Changes in our tax rates could affect our future results

Our future effective tax rates could be affected by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws or their interpretation. In addition we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision, however there can be no assurance that we will accurately predict the outcomes of these audits and the actual outcomes of these audits could have a material impact on our net income. In addition, the carrying values of deferred tax assets are dependent on our ability to generate future taxable income.

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The matters relating to the investigation of our historical stock option granting practices and the restatement of our consolidated financial statements have resulted in our being named as a party in a derivative legal action and may result in future litigation, which could harm our business and financial condition.

As a result of our voluntary internal review of our historical stock option granting practices, we recorded additional non-cash compensation expense. To correct these accounting errors, we restated our consolidated financial statements for certain applicable periods. The investigation and restatements have exposed us to greater risks associated with litigation. Publicity resulting from these actions may materially adversely affect us, regardless of the cause or effect of the actions. Since December 31, 2006, one derivative action has been filed naming a number of current and former officers and directors as defendants. The Company is a nominal defendant. We cannot assure you about the outcome of this derivative lawsuit or any future litigation. The conduct and resolution of litigation could be time consuming, expensive, cause us to have to pay legal expenses in certain instances to current and former officers and directors, and may distract management from the conduct of our business. In addition, damages and other remedies awarded in any such litigating could harm our business and financial condition.

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 report include, without limitation, changes in travel and outside dining habits as a result of terrorist activities perceived or otherwise, weather and other acts of God.

There are inherent limitations in all control systems, and misstatements due to error that could seriously harm our business may occur and not be detected.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls and disclosure controls will prevent all possible error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by the individual acts of some persons or by collusion of two or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

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

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square feet of warehouse facilities used primarily for construction activities and related storage and retail goods storage and distribution related activities.

The Golden Nugget—Las Vegas (“GNLV”) occupies approximately eight acres and GNLV owns the buildings and approximately 90% of the land. GNLV leases the remaining land under three ground leases that expire (given effect to their options to renew) on dates ranging from 2025 to 2102. The Golden Nugget—Laughlin (“GNL”) occupies approximately 13.5 acres, all of which is owned by GNL.

ITEM 3.    LEGAL PROCEEDINGS

On April 4, 2006, a purported class action lawsuit was filed against Joe’s Crab Shack – San Diego, Inc. in the Superior Court of California in San Diego by Kyle Pietrzak and others similarly situated. The lawsuit alleges that the defendant violated wage and hour laws, including the failure to pay hourly and overtime wages, failure to provide meal periods and rest periods, failing to provide minimum reporting time pay, failing to compensate employees for required expenses, including the expense to maintain uniforms, and violations of the Unfair Competition Law. In June 2006, the lawsuit was amended to include Kristina Brask as a named plaintiff and named Crab Addison, Inc. and Landry’s Seafood House—Arlington, Inc. as additional defendants. The Company denies Plaintiffs’ claims. We have reached a tentative settlement agreement which we expect to submit to the court and fully accrued the amount, which is not believed to be material to our financial position. There is no certainty, however, that the settlement agreement, when submitted, will be approved by the court.

On February 18, 2005, and subsequently amended, a purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in Los Angeles by Dustin Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior Court in San Bernardino. The lawsuits allege that Rainforest Cafe violated wage and hour laws, including not providing meal and rest breaks, uniform violations and failure to pay overtime. The Plaintiffs seek to recover damages, including unpaid wages, reimbursement for uniform expenses and penalties imposed by state law. The Company denies Plaintiff’s claims and intends to vigorously defend this matter. As the litigation is in the early stages of the legal process, and given the inherent uncertainties of litigation, the ultimate outcome cannot be predicted at this time, nor can the amount of any potential loss be reasonably estimated.

On August 21, 2006 and subsequently amended on January 5, 2007, a purported shareholder derivative action entitled Albert D. Hulliung, derivatively on Behalf of Nominal Defendant Landry’s Restaurants, Inc. was brought against certain members of our Board of Directors and certain of our current and former executive officers in the District Court of Harris County, Texas. The lawsuit alleges breach of fiduciary duties, unjust enrichment and other violations of law relating to the Company’s historical stock option practices. Plaintiff seeks to recover damages in favor of the Company for damages sustained by the Company, disgorgement of profits, and attorney’s fees and expenses. The Company has formed an independent special committee of the Board of Directors to investigate the allegations and has filed a motion with the court to stay the proceedings pending the outcome of the investigation.

On August 1, 2007, we filed a lawsuit in Federal District Court in the Southern District of Texas—Galveston Division against U.S. Bank, National Association, et. al., the Indenture Trustee under the Company’s $400.0 million Senior Notes (“Notes”) for wrongful acceleration of the Notes due to an alleged event of default resulting from our failure to timely file our Form 10-K with the Securities and Exchange Commission and deliver this Form 10-K to the Indenture Trustee, all within the time period specified by the rules and regulations of the Securities & Exchange Commission. We obtained a Temporary Restraining Order halting the acceleration and reinstating the Notes pending a temporary injunction hearing currently scheduled for August 16, 2007. We are seeking a declaratory judgment that the Notes were improperly accelerated and damages.

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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, 2006.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Stock

Our common stock trades on the New York Stock Exchange under the symbol “LNY.” As of July 31, 2007, there were approximately 1,061 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
2005
First Quarter	$	33.00	$	26.47
Second Quarter		31.60		25.39
Third Quarter		32.90		26.82
Fourth Quarter		29.78		25.80
2006
First Quarter	$	35.45	$	26.14
Second Quarter		36.30		29.48
Third Quarter		32.98		26.11
Fourth Quarter		32.10		27.40

PERFORMANCE GRAPH

Comparison of Five-Year Cumulative Total Return Among

Landry’s Restaurants, Inc., Dow Jones Global Index

And Dow Jones Restaurant Index

	01/01/02	01/01/03	01/01/04	01/01/05	01/01/06	01/01/07
Dow Jones Industrial Average	100	83	104	108	107	124
Dow Jones Restaurant Index	100	81	115	148	154	187
Landry’s Restaurants, Inc.	100	114	138	156	143	161

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Dividend Policy

Commencing in 2000, we began paying an annual $0.10 per share dividend, declared and paid in quarterly installments of $0.025 per share. In April 2004, the annual dividend was increased to $0.20 per share, declared and paid in quarterly installments of $0.05 per share. While we have paid a dividend every quarter since April 2000, 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. The indenture under which our senior notes due 2014 were issued and our bank credit facility limit increases in dividends on our common stock to specified levels.

Stock Repurchase

In November 1998, we announced the authorization of an open market stock buy back program, which was renewed in April 2000, for an additional $36.0 million. In October 2002, we authorized a $50.0 million open market stock buy back program and in September 2003, we authorized another $60.0 million open market stock repurchase program. In October 2004, we authorized a $50.0 million open market stock repurchase program. In March 2005, we announced a $50.0 million authorization to repurchase common stock. In May 2005, we announced a $50.0 million authorization to repurchase common stock. These programs have resulted in our aggregate repurchasing of approximately 17.6 million shares of common stock for approximately $290.5 million through December 31, 2005.

We purchased 0.2 million shares of our common stock during 2006, and have approximately $55.5 million at December 31, 2006 that may yet be purchased under existing programs.

ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth our selected consolidated financial data as of and for the years ended December 31, 2006, 2005, 2004, 2003, and 2002. The financial data as of and for the years ended December 31, 2006, 2005 and 2004 are derived from our audited consolidated financial statements which are incorporated by reference herein, and should be read in conjunction with our consolidated financial statements and the notes thereto, which have been audited by Grant Thornton LLP for the years ended December 31, 2006, 2005 and 2004. The financial data as of and for the years ending December 31, 2003 and 2002 has been derived from our consolidated financial statements which were previously audited by Ernst & Young LLP. The financial data for 2002 and 2003 does not agree to the previously audited financial statements as it reflects certain reclassification for discontinued operations that have not been audited.

As previously disclosed, in 2006 we initiated a voluntary review of our historical stock option granting process from 1993 to 2005 which we completed in 2007. The review identified certain employee stock option awards for which the Company had historically used an incorrect measurement date or failed to record compensation expense due to materiality. As a result, we have determined that a restatement of our financial statements for the years 2001 and prior is appropriate. The cumulative unrecorded stock compensation expense for the years 2002 to 2005 is not material. The aggregate impact of the additional compensation expense for the years 2001 and prior was $14.2 million dollars on a pre-tax basis or $9.1 million after tax and is reflected as an increase to additional paid-in capital with a corresponding decrease to retained earnings in the 2002 stockholders’ equity included in the following table. The cumulative effect of the additional compensation expense for the years 2002 to 2005 of $2.8 million pre-tax, or $1.8 million after tax, is not material in any fiscal year and is included as a non-cash charge in the fourth quarter of 2006. A component of this non-cash charge, or $1.1 million pre-tax and $0.8 million after tax, is classified as discontinued operations and the remainder is included in general and administrative expense in the statement of income.

Discontinued Operations

During 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s Crab Shack units. Results of operations for all units included in the disposal plan have been reclassified as discontinued operations in the statements of income for all periods presented.

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The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and our Consolidated Financial Statements and Notes. All amounts are in thousands, except per share data.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

	Year Ended December 31,
	2006			2005			2004			2003			2002
REVENUES	$	1,134,301		$	897,460		$	804,903		$	751,758		$	566,376
OPERATING COSTS AND EXPENSES:
Cost of revenues		258,995			233,591			225,439			214,991			160,492
Labor		369,756			269,824			232,327			218,530			165,227
Other operating expenses		288,178			223,590			199,661			184,334			143,268
General and administrative expense		57,977			47,442			48,445			42,433			35,468
Depreciation and amortization		57,465			44,761			38,959			32,086			25,487
Asset impairment expense (1)		8,636			—			1,709			13,144			2,200
Pre-opening expenses		6,230			3,031			3,234			4,167			2,705
Total operating costs and expenses		1,047,237			822,239			749,774			709,685			534,847
OPERATING INCOME		87,064			75,221			55,129			42,073			31,529
OTHER EXPENSE (INCOME):
Interest expense, net		49,215			31,207			10,846			6,856			3,477
Other, net (2)		(2,421	)		(218	)		13,176			1,096			(1,122	)
Total other expense		46,794			30,989			24,022			7,952			2,355
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		40,270			44,231			31,107			34,121			29,174
PROVISION (BENEFIT) FOR INCOME TAXES (3)		10,750			13,888			(9,549	)		3,916			8,726
INCOME FROM CONTINUING OPERATIONS		29,520			30,343			40,656			30,205			20,448
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES (1)		(51,290	)		14,472			25,865			14,709			20,043
NET INCOME (LOSS)	$	(21,770	)	$	44,815		$	66,521		$	44,914		$	40,491
EARNINGS PER SHARE INFORMATION:
BASIC
Income from continuing operations	$	1.39		$	1.36		$	1.50		$	1.10		$	0.79
Income (loss) from discontinued operations		(2.41	)		0.65			0.96			0.53			0.77
Net income (loss)	$	(1.02	)	$	2.01		$	2.46		$	1.63		$	1.56
Weighted average number of common shares outstanding		21,300			22,300			27,000			27,600			25,900
DILUTED
Income from continuing operations	$	1.34		$	1.32		$	1.46		$	1.07		$	0.76
Income (loss) from discontinued operations		(2.33	)		0.63			0.93			0.52			0.75
Net income (loss)	$	(0.99	)	$	1.95		$	2.39		$	1.59		$	1.51
Weighted average number of common and common share equivalents outstanding		22,000			23,000			27,800			28,325			26,900
EBITDA
Net Income (loss)		(21,770	)		44,815			66,521			44,914			40,491
Add back:
Income (loss) from discontinued operations		51,290			(14,472	)		(25,865	)		(14,709	)		(20,043	)
Provision (benefit) for income tax		10,750			13,888			(9,549	)		3,916			8,726
Other expense (income)		46,794			30,989			24,022			7,952			2,355
Depreciation and amortization		57,465			44,761			38,959			32,086			25,487
Asset impairment expense		8,636			—			1,709			13,144			2,200
Stock based compensation expense		7,610			689			432			81			—
EBITDA from continuing operations		160,775			120,670			96,229			87,384			59,216
BALANCE SHEET DATA (AT END OF PERIOD)
Working capital (deficit)		(67,184	)		197,972			161,515			(38,767	)		(55,475	)
Total assets		1,464,912			1,612,579			1,344,952			1,104,883			934,898
Short-term notes payable and current portion of notes and other obligations		748			1,852			1,700			1,963			1,783
Long term notes and other obligations, net of current portion		710,456			816,044			559,545			299,736			189,404
Stockholders’ equity (1)(4)		494,707			516,770			600,897			599,894			563,406

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(1) In 2006, 2004, 2003 and 2002, we recorded asset impairment charges related to continuing operations of $8.6 million ($6.3 million after tax), $1.7 million ($1.2 million after tax), $13.1 million ($9.1 million after tax) and $2.2 million ($1.5 million after tax) respectively, related to the adjustment to estimated fair value of certain restaurant properties and assets. In 2006, we also recorded asset impairment charges and other losses totaling $74.2 million ($44.9 million after tax) related to discontinued operations. We consider the asset impairment expense as additional depreciation and amortization, although shown as a separate line item in the consolidated income statements.

(2) In 2004, we recorded prepayment penalty expense and other costs related to the refinancing of our long-term debt of approximately $16.6 million ($11.3 million after tax).

(3) In 2004 and 2003, we recognized $18.5 million and $6.3 million in income tax benefits for a reduction of the valuation allowance and deferred tax liabilities attributable to tax benefits deemed realizable and reduced accruals.

(4) Stockholders’ equity in 2002 includes the cumulative effect of the restatement described above.

EBITDA is not a generally accepted accounting principles (“GAAP”) measurement and is presented solely as a supplemental disclosure because we believe that it is a widely used measure of operating performance. EBITDA is not intended to be viewed as a source of liquidity or as a cash flow measure as used in the statement of cash flows. EBITDA is simply shown above as it is a commonly used non-GAAP valuation statistic. EBITDA as shown differs from that used in our credit agreements primarily due to non guarantor subsidiaries and other specifically defined calculations.

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

Introduction

The following presents an analysis of the results and financial condition of our continuing operations. Except where indicated otherwise, the results of discontinued operations are excluded from this discussion.

We primarily own and operate full-service, casual dining restaurants and two casinos. As of December 31, 2006, we operated 179 full service restaurants. In addition to these units, there were several limited menu restaurants and other properties (as described in Item 1. Business), and the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nevada as more fully described below.

During 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s Crab Shack units. Results of operations for all units included in the disposal plan have been reclassified to discontinued operations in the statements of income for all periods presented.

On November 17, 2006, we completed the sale of 120 Joe’s Crab Shack restaurants to JCS Holdings, LLC, an unaffiliated new entity created by J.H. Whitney Capital Partners, LLC for approximately $192.0 million, including the assumption of certain working capital liabilities to be finalized in 2007. In connection with the sale, we recorded pre-tax impairment charges and other losses totaling $49.2 million ($29.8 million after tax). Under the terms of the sale, we are providing JCS Holdings, LLC transitional support services for a period not expected to exceed twelve months. These services include, among other things, IT and purchasing support, as well as office space. Following cessation of these activities, we do not anticipate any significant continuing involvement with or cash flows from JCS Holdings, LLC.

We recorded additional pre-tax impairment charges totaling $24.9 million for the year ended December 31, 2006 to write down carrying values of assets pertaining to the remaining stores included in our disposal plan. We expect to sell the land and improvements belonging to these remaining restaurants, or abandon those locations, within the next 12 to 18 months.

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In connection with our strategic review, we also identified certain restaurants that we believe are suitable for conversion into other Landry’s concepts. As a result of this review, we took a charge of $8.6 million to impair certain assets relating to these conversion units to reflect our best estimates of their fair market value. The results of operations for these restaurants are included in continuing operations.

On September 27, 2005, Landry’s Gaming, Inc., an unrestricted subsidiary, purchased the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada (“GN”) for $163.0 million in cash, the assumption of $155.0 million of Senior Secured Notes due 2011 and the assumption of approximately $27.0 million under an existing senior revolving credit facility and the further assumption of certain working capital including $27.5 million in cash. Under the terms of the purchase agreement, the currently outstanding Senior Secured Notes due 2011 remain outstanding obligations of GN following the closing. The Golden Nugget—Las Vegas occupies approximately eight acres in downtown Las Vegas with approximately 38,000 square feet of gaming area. The property also features three towers containing 1,907 rooms, the largest number of guestrooms in downtown Las Vegas. The Golden Nugget—Laughlin is located on 13 acres on the Colorado River with 32,000 square feet of gaming space and 300 rooms. The results of operations for these properties are included in our financial statements from the date of acquisition.

The Specialty Growth Division is primarily engaged in operating complementary entertainment and hospitality activities, such as miscellaneous beverage carts and various kiosks, amusement rides and games and some associated limited hotel properties, generally at locations in conjunction with our core restaurant operations. The total assets, revenues, and operating profits of these complementary “specialty” business activities are considered not material to the overall business and below the threshold of a separate reportable business segment under SFAS No. 131.

We are in the business of operating restaurants, two casinos and the above-mentioned complementary activities. We do not engage in real estate operations other than those associated with the ownership and operation of our business. We own a fee interest (own the land and building) in a number of properties underlying our businesses, but do not engage in real estate sales or real estate management in any significant fashion or format. The Chief Executive Officer, who is responsible for our operations, reviews and evaluates both core and non-core business activities and results, and determines financial and management resource allocations and investments for all business activities.

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

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 other casinos in the markets in which we operate and from other 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 restaurant chains and casinos as well as local owner-operated restaurants and casinos. We also compete with other restaurants, retail establishments and gaming companies for restaurant and casino sites. We intend to pursue an acquisition strategy.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “believes,” “estimates,” “expects,” “intends” and other similar expressions. 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

26

expenditures, as well as general market conditions, competition, and pricing. Forward-looking statements include statements regarding: potential acquisitions of other restaurants, gaming operations and lines of businesses in other sectors of the hospitality and entertainment industries; future capital expenditures, including the amount and nature thereof; potential divestitures of restaurants, restaurant concepts and other operations or lines of business, business strategy and measures to implement such 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, hotels and casinos; the effect of changes in tax laws; actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to our business and the impact of any such actions; our ability to maintain regulatory approvals for our existing businesses and our ability to receive regulatory approval for our new businesses; our expectations of the continued availability and cost of capital resources; 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; the risks described in “Risk Factors.”

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 our 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. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described under Item 1A. “Risk Factors” and elsewhere in this report, or in the documents incorporated by reference herein. We assume no obligation to modify or revise any forward looking statements to reflect any subsequent events or circumstances arising after the date that the statement was made.

Results of Operations

Profitability

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

	Year Ended December 31,
	2006		2005		2004
Revenues	100.0	%	100.0	%	100.0	%
Cost of revenues	22.8	%	26.0	%	28.0	%
Labor	32.6	%	30.1	%	28.9	%
Other operating expenses	25.4	%	24.9	%	24.8	%
Unit Level Profit	19.2	%	19.0	%	18.3	%

Year ended December 31, 2006 Compared to the Year ended December 31, 2005

Restaurant and hospitality revenues increased $71,104,296, or 8.5%, from $831,818,786 to $902,923,082 for the year ended December 31, 2006 compared to the year ended December 31, 2005. The total increase/change in revenue is comprised of the following approximate amounts: 2006 restaurant openings—increase of $48.3 million; 2006 restaurant closings—decrease of $9.0 million; locations open 2006 and 2005 including “honeymoon” periods—increase of $34.8 million; units closed for an extended period as a result of the hurricane—decrease of $4.7 million; and the remainder of the difference is attributable to the change in sales for stores not open a full comparable period. The total number of units open as of December 31, 2006 and 2005 increased from 177 as of December 31, 2005 to 179 as of December 31, 2006.

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Gaming revenues increased $165,737,338 for the year ended December 31, 2006 as a result of the acquisition of the Golden Nugget. The results of the Golden Nugget are included from the September 27, 2005 acquisition date.

As a result of increased revenues, cost of revenues increased $25,403,610, or 10.9%, from $233,590,929 to $258,994,539 in the year ended December 31, 2006, compared to the same period in the prior year. Cost of revenues as a percentage of revenues for the year ended December 31, 2006, decreased to 22.8% from 26.0% in 2005. The decrease in cost of revenues as a percentage of revenues resulted primarily from the acquisition of the Golden Nugget since gaming revenues are generally derived from higher labor and other operating expenses and lower cost of revenues than restaurant and hospitality revenues.

Labor expenses increased $99,930,996, or 37.0%, from $269,824,500 to $369,755,496 in the year ended December 31, 2006, compared to the same period in the prior year, primarily as a result of increased revenues. Labor expenses as a percentage of revenues for the year ended December 31, 2006 increased to 32.6% from 30.1% in 2005, principally due to the acquisition of the Golden Nugget since gaming revenues are generally derived from higher labor and other operating expenses and lower cost of revenues than restaurant and hospitality revenues.

Other operating expenses increased $64,588,497, or 28.9%, from $223,589,627 to $288,178,124 in the year ended December 31, 2006, compared to the same period in the prior year, principally as a result of increased revenues. Such expenses increased as a percentage of revenues to 25.4% in 2006 from 24.9% in 2005, as a primary result of the acquisition of the Golden Nugget since gaming revenues are generally derived from higher labor and other operating expenses and lower cost of revenues than restaurant and hospitality revenues.

General and administrative expenses increased $10,534,765, or 22.2%, from $47,442,596 to $57,977,361 in the year ended December 31, 2006, compared to the same period in the prior year. General and administrative expenses decreased as a percentage of revenues to 5.1% in 2006 from 5.3% in 2005. This percentage decrease is primarily attributable to the increase in revenues, offset by increased stock-based compensation expense as compared to the prior year comparable period.

Depreciation and amortization expense increased $12,704,419, or 28.4%, from $44,760,700 to $57,465,119 in the year ended December 31, 2006, compared to the same period in the prior year. The increase for 2006 was primarily due to an increase in depreciation related to the addition of new restaurants and equipment and the acquisition of the Golden Nugget.

As part of our strategic review of operations in 2006, we identified certain Joe’s restaurants that we believe are suitable for conversion into other Landry’s concepts. As a result of this review, we took a charge of $8.6 million to impair certain assets relating to these conversion units to reflect our best estimates of their fair market value. Assets that were impaired are primarily leasehold improvements and to a lesser extent equipment. We did not take any impairment charges in 2005.

Restaurant pre-opening expenses were $6,230,465 for the year ended December 31, 2006, compared to $3,030,611 for the same period in the prior year. The increase resulted from our opening a greater number of larger scale restaurants during 2006 as compared to units opened in 2005.

The increase in net interest expense for the year ended December 31, 2006 as compared to the prior year is primarily due to higher borrowings, as well as an increase in our average borrowing rate.

Other income, net for 2006 was $2,421,901 and consisted primarily of gains recognized on the sale of a restaurant property and insurance proceeds.

Provision for income taxes decreased by $3,138,141 to $10,750,064 in the year ended December 31, 2006. Our effective tax rate for 2006 was 26.7% compared to 31.4% in 2005.

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Year ended December 31, 2005 Compared to the Year ended December 31, 2004

Restaurant and hospitality revenues increased $26,915,734, or 3.3%, from $804,903,052 to $831,818,786 for the year ended December 31, 2005 compared to the year ended December 31, 2004. The total increase/change in revenue is comprised of the following approximate amounts: 2005 restaurant openings—increase of $19.6 million; restaurant closings—decrease of $5.2 million; locations open 2005 and 2004 including “honeymoon” periods—increase of $ 16.1 million; day lost due to leap year—decrease of $1.8 million; units closed for an extended period as a result of the hurricane—decrease of $1.9 million; and the remainder of the difference is attributable to the change in sales for stores not open a full comparable period. The total number of units open as of December 31, 2005 and 2004 were 177 and 175, respectively.

Gaming revenues increased $65,640,727 for the year ended December 31, 2005 as a result of the acquisition of the Golden Nugget. The results of the Golden Nugget are included from the September 27, 2005 acquisition date.

As a primary result of increased revenues, cost of revenues increased $8,152,260, or 3.6%, from $225,438,669 to $233,590,929 in the year ended December 31, 2005, compared to the same period in the prior year. Cost of revenues as a percentage of revenues for the year ended December 31, 2005, decreased to 26.0% from 28.0 % in 2004. The decrease in cost of revenues as a percentage of revenues primarily reflects a moderate menu price increase, stable commodities prices, a shift in product mix and the acquisition of the Golden Nugget.

Labor expenses increased $37,497,160, or 16.1%, from $232,327,340 to $269,824,500 in the year ended December 31, 2005, compared to the same period in the prior year, principally as a result of increased revenues. Labor expenses as a percentage of revenues for the year ended December 31, 2005 increased to 30.1% from 28.9% in 2004, principally due to increased hourly wage rates and higher overtime and the acquisition of the Golden Nugget.

Other operating expenses increased $23,929,045, or 12.0%, from $199,660,582 to $223,589,627 in the year ended December 31, 2005, compared to the same period in the prior year, principally as a result of increased revenues. Such expenses increased as a percentage of revenues to 24.9% in 2005 from 24.8% in 2004, as a primary result of the acquisition of the Golden Nugget.

General and administrative expenses decreased $1,003,014, or 2.1%, from $48,445,610 to $47,442,596 in the year ended December 31, 2005, compared to the same period in the prior year, and decreased as a percentage of revenues to 5.3% in 2005 from 6.0% in 2004. The decrease is due to lower professional fees related to Sarbanes-Oxley and leverage associated with the acquisition of the Golden Nugget.

Depreciation and amortization expense increased $5,801,663, or 14.9%, from $38,959,037 to $44,760,700 in the year ended December 31, 2005, compared to the same period in the prior year. The increase for 2005 was primarily due to the acquisition of the Golden Nugget and an increase in depreciation related to the addition of new restaurants and equipment.

Asset impairment expense of approximately $1.7 million relating to one underperforming restaurant was recorded for 2004. The charge was taken due to sales declines combined with deterioration in this particular restaurant’s profitability and management’s lowered outlook for improvement in the specific property. Assets that were impaired were primarily leasehold improvements and to a lesser extent equipment. No asset impairment was recorded in 2005.

Restaurant pre-opening expenses were $3,030,611 for the year ended December 31, 2005, compared to $3,234,018 for the same period in the prior year. The decrease for the 2005 period was attributable to a decrease in units opened in 2005 as compared to 2004.

The increase in net interest expense for the year ended December 31, 2005 as compared to the prior year is primarily due to higher borrowings, as well as an increase in our average borrowing rate.

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Other income, net for 2005 was immaterial. Other expense, net for 2004 was $13,176,474 and was comprised primarily of $14.6 million in pre-payment penalties and related fees associated with the pay down of our $150.0 million senior notes and bank credit facility, both of which were entered into in 2003, partially offset by $1.1 million in business interruption insurance recoveries.

Provision for income taxes increased by $23,437,686 to $13,888,205 in the year ended December 31, 2005 compared to a tax benefit of $9,549,481 in 2004. In 2004 we generated a net $18.5 million income tax benefit from the reversal of the remaining valuation allowance attributable to tax benefits associated with the Rainforest Cafe acquisition deemed realizable. The previously established valuation allowance was reversed at December 31, 2004, due to the strong 2004 and future forecasted profitability of the Rainforest Cafe restaurants, a successful transition from a tax-loss incurring stand-alone public company to a highly profitable and taxable income producing wholly-owned subsidiary, coupled with the approaching end of specific recognition limitations on allowable deductions and tax assets and the 2004 resolution of certain tax issues, which caused management to believe the remaining deferred tax assets previously reserved would more likely than not be realized.

Liquidity and Capital Resources

On July 24, 2007, we were notified by U.S. Bank, Indenture Trustee for our $400.0 million Senior Notes, that such notes were accelerated, to be due and payable immediately as a result of our inability to file and deliver to the Indenture Trustee this Form 10-K pending completion of our stock option review. We believe the attempt to accelerate is inappropriate and we have received a Temporary Restraining Order (TRO) from the U.S. District Federal Court sitting in Galveston County, Texas requiring the Trustee to rescind the acceleration pending a hearing on August 16, 2007. We believe we will be successful in obtaining a permanent rescission of the acceleration, or will negotiate a consent from the note holders or will obtain alternative financing sources. If we are unsuccessful in obtaining a permanent rescission of the accelerations, it is likely that any alternative financing will carry significantly higher interest rates and the associated higher interest expense. Furthermore, such alternative financing may well place substantially more restrictions on our ability to execute our strategies and business plan.

On June 14, 2007, our wholly owned unrestricted subsidiary, Golden Nugget, Inc. (“Golden Nugget”), completed a new $545.0 million Credit Facility consisting of a $330.0 million first lien term loan which includes a $120.0 million delayed draw component to finance the construction expansion at the Golden Nugget Hotel and Casino in Las Vegas, Nevada, plus a $50.0 million revolving credit facility, and a $165.0 million second lien term loan with terms ranging from 6 to 7 years. The first lien term loan bears interest at Libor or the Bank’s base rate, plus a financing spread, 2.0% for Libor and .75% for base rate borrowings. In addition, the Credit Facility requires a commitment fee on the unfunded portion for both the $50.0 million revolving credit facility and the $120.0 million delayed draw term loan. The financing spread and commitment fee for the revolving credit facility increases or decreases depending on the leverage ratio as defined in the Credit Facility. The second lien term facility bears interest at Libor or the Bank’s base rate, plus a financing spread, 3.25% for Libor and 2% for base rate borrowings. The second lien term facility matures on December 31, 2014. Interest is paid quarterly. Both the first and second lien term loans are subject to customary banking covenants and conditions, including minimum EBITDA, interest charge and financial leverage ratios, limitations on acquisitions, debt, investments and other restricted payments as defined in the Credit Facility, plus certain restrictions and conditions to access funds under the $120.0 million delayed draw term loan to finance the construction expansion. The Credit Facility provides for the payment of a one-time dividend of up to $187.5 million to the Company or a designated subsidiary of the Company representing repayment of amounts previously expended on the Golden Nugget. The $187.5 million will be available for acquisitions, debt repayment, stock repurchases and general corporate purposes.

On June 14, 2007, the proceeds from the new $545.0 million Credit Facility were used to repay all of the Golden Nugget’s outstanding debt, including its 8 ¾% Senior Secured Notes due 2011 totaling $155.0 million, plus the outstanding balance of approximately $10.0 million on its former $43.0 million revolving credit facility with Wells Fargo Foothill, Inc. In addition, the proceeds were used to pay associated tender premiums of

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approximately $8.8 million due to the early redemption of the Senior Secured Notes, plus accrued interest and related transaction fees and expenses.

In December 2004, we refinanced our existing revolving credit facility and existing senior notes by entering into a new five year $300.0 million Bank Credit Facility and a six year $150.0 million Term Loan. In November 2006, we utilized proceeds from the Joe’s sale to pay down approximately $109.5 million on the term loan, leaving a balance outstanding of approximately $37.8 million as of December 31, 2006. The Bank Credit Facility matures in December 2009 and the Term Loan matures in December 2010. Interest on the Bank Credit Facility is payable monthly or quarterly at Libor or the bank’s base rate plus a financing spread. Interest on the Term Loan is payable quarterly at Libor plus a financing spread. The financing spread under the Bank Credit Facility and the Term Loan is currently 2.0% for Libor borrowings and 1.0% for base rate borrowings. As of December 31, 2006, we had approximately $216.7 million available under the existing credit facility for expansion and working capital purposes.

Concurrent with the closing of the Bank Credit Facility and Term Loan in December 2004, we also issued $400.0 million in senior notes through a private placement offering. The senior notes are general unsecured obligations of the Company and mature December 2014. Interest is payable semi-annually at 7.5%. On June 16, 2005, we completed an exchange offering whereby substantially all of the senior notes issued under the private placement were exchanged for senior notes registered under the Securities Act of 1933.

Net proceeds from the Bank Credit Facility and senior notes totaled $536.6 million and were used to repay all outstanding liabilities under the existing credit facility and senior notes. These debt repayments resulted in a pre-tax charge of $16.6 million in the fourth quarter of 2004.

The Bank Credit Facility and Term Loan are secured by substantially all real and personal property of subsidiaries and governed by certain financial covenants, including minimum fixed charge, net worth, and our financial leverage ratios as well as limitations on dividend payments, capital expenditures and other restricted payments as defined in the agreements.

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.

Working capital, excluding discontinued operations, increased from a deficit of $63.2 million as of December 31, 2005 to a deficit of $74.9 million as of December 31, 2006 primarily due to the purchase of the Golden Nugget Hotels and Casinos and repurchase of our common stock during 2005. Cash flow to fund future operations, new restaurant development, stock repurchases, and acquisitions will be generated from operations, available capacity under our credit facility and additional financing, if appropriate.

From time to time, we review opportunities for restaurant acquisitions and investments in the hospitality, entertainment (including gaming), 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, 2007.

As a primary result of our 2004 refinancing, we have incurred higher interest expense. To manage our interest rate exposure, we entered into fair value hedges with a notional amount of $100.0 million, whereby we swapped the fixed interest rate of the 7.5% senior notes due 2014 for floating interest rates equal to six month Libor plus a financing spread of 2.34% to 2.38%.

Since April 2000, we have paid an annual $0.10 per share dividend, declared and paid in quarterly amounts. We increased the annual dividend to $0.20 per share in April 2004.

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In 2006, we incurred $205.6 million for capital expenditures including $81.6 million on the remodel of the Golden Nugget Hotel and Casino in downtown Las Vegas, Nevada, the opening of 10 new restaurants and $19.7 million on land for future development. In 2006, we also spent $7.8 million to acquire an 80% interest in the T-Rex restaurant. In 2007, we expect to incur approximately $103.4 million, including opening 8 units, $42.0 million to complete the renovation and expansion of the Golden Nugget Hotel and Casino and approximately $18.0 million on the construction of a new T-Rex and Yak & Yeti’s restaurant at two Disney properties.

Off Balance Sheet Arrangements

As of December 31, 2006, we had contractual obligations as described below. These obligations are expected to be funded primarily through cash on hand, cash flow from operations, working capital, the Bank Credit Facility and additional financing sources in the normal course of business operations. Our obligations include off balance sheet arrangements whereby the liabilities associated with non cancelable operating leases, unconditional purchase obligations and standby letters of credit are not fully reflected in our balance sheets.

Contractual Obligations	2007		2008-2009		2010-2011		2012+		Total
Long Term Debt	$	748,122	$	1,278,255	$	205,846,684	$	400,000,000	$	607,873,061
Operating Leases		38,160,390		67,339,509		56,597,646		245,024,332		407,121,877
Unconditional Purchase Obligations		36,549,756		5,749,003		2,730,880		307,468		45,337,107
Other Long Term Obligations		22,150,000		39,000,000		—		—		61,150,000
Total Cash Obligations	$	97,608,268	$	113,366,767	$	265,175,210	$	645,331,800	$	1,121,482,045
Other Commercial Commitments
Line of Credit	$	—	$	101,574,313	$	—	$	—	$	101,574,313
Standby Letters of Credit		11,539,222		—		—		—		11,539,222
Total Commercial Commitments		11,539,222		101,574,313		—		—		113,113,535
Total	$	109,147,490	$	214,941,080	$	265,175,210	$	645,331,800	$	1,234,595,580

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 will continue to open restaurants in highly seasonal tourist markets. Periodically, our sales and profitability may be negatively affected by adverse weather. The timing of unit openings can and will affect quarterly results.

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. Goodwill and other non-amortizing intangible assets are reviewed for impairment at least annually using estimates of future operating results. 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 values, reduced for estimated disposal costs, and are included in other current assets.

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We operate approximately 179 properties and periodically we expect to experience unanticipated individual unit deterioration in revenues and profitability, on a short-term and occasionally longer-term basis. When such events occur and we determine that the associated assets are impaired, we will record an asset impairment expense in the quarter such determination is made. Due to our average restaurant net investment cost, excluding the owned land component, of approximately $2.0 million, such amounts could be significant when and if they occur. However, such asset impairment expense does not affect our financial liquidity, and is usually excluded from many valuation model calculations.

We maintain a large deductible insurance policy related to property, general liability and workers’ compensation coverage. Predetermined loss limits have been arranged with insurance companies to limit our per occurrence cash outlay. Accrued expenses and other liabilities include estimated costs to settle unpaid claims and estimated incurred but not reported claims using actuarial methodologies.

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS No. 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be recognized. We regularly assess the likelihood of realizing the deferred tax assets based on forecasts of future taxable income and available tax planning strategies that could be implemented and adjust the related valuation allowance if necessary.

Our income tax returns are subject to examination by the Internal Revenue Service and other tax authorities. We regularly assess the potential outcomes of these examinations in determining the adequacy of our provision for income taxes and our income tax liabilities. Inherent in our determination of any necessary reserves are assumptions based on past experiences and judgments about potential actions by taxing authorities. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We believe that we have adequately provided for any reasonable and foreseeable outcome related to uncertain tax matters.

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123R, “Share-Based Payment,” (“SFAS 123R”), using the modified prospective application method. Under this transition method, we will record compensation expense for all stock option awards granted after the date of adoption and for the unvested portion of previously granted stock option awards that remain outstanding at the date of adoption. The amount of compensation cost recognized was based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123. Under the provisions of SFAS 123R, the recognition of unearned compensation, a contra-equity account representing the amount of unrecognized restricted stock compensation expense, is no longer required. Therefore, in the first quarter of 2006 the unearned compensation amount that was included in our December 31, 2005 consolidated balance sheet in the amount of $6.4 million was reduced to zero with a corresponding decrease to capital in excess of par value. Results for prior periods have not been restated upon adoption of 123R.

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 amounts reported in the financial statements and accompanying notes. Estimates are used for, but not limited to, the recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets and costs to settle unpaid claims. Actual results may differ materially from those estimates.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken

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in a tax return, as well as guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not expect the adoption of FIN 48 to have a material impact on our financial statements.

In June 2006, the FASB ratified the consensus reached on EITF Issue No. 06-03, How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, Gross Versus Net Presentation) (EITF 06-03). The EITF reached a consensus that the presentation of taxes on either a gross or net basis is an accounting policy decision that requires disclosure. EITF 06-03 is effective for the first interim reporting period beginning after December 15, 2006. We pay gross receipts tax on liquor sales in certain jurisdictions. Our policy is to present these taxes gross within revenues and expenses. The adoption of EITF 06-03 will not have any effect on our financial position or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. SAB 108 addresses the diversity in practice of quantifying and assessing materiality of financial statement errors. It is effective for fiscal years ending after November 15, 2006 and allows for a one-time transitional cumulative effect adjustment to the opening balance of retained earnings for errors that were not previously deemed material. The adoption of SAB 108 did not have an impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 is not expected to have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, that the adoption of SFAS 159 will have on 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 labor costs, including expected future increases in federal and state minimum wages, energy costs, and 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, 2006 included $239.4 million of floating-rate debt attributed to borrowings at an average interest rate of 7.7%. As a result, our annual interest cost in 2007 will fluctuate based on short-term interest rates.

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In connection with the 7.5% senior notes due 2014, we entered into two interest swap agreements with the objective of managing our exposure to interest rate risk and lowering interest expense. The agreements were effective December 2004 and March 2005, and mature in December 2014 for an aggregate notional amount of $100.0 million.

The impact on annual cash flow of a ten percent change in the floating-rate (approximately 0.8%) would be approximately $1.8 million annually based on the floating-rate debt and other obligations outstanding at December 31, 2006; however, there are no assurances that possible rate changes would be limited to such amounts. Certain holders of our Senior Notes have attempted to accelerate the Notes. If we are unsuccessful in permanently rescinding the attempted acceleration, we will be required to obtain alternative financing which will result in higher interest rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statement schedule is set forth commencing on page 66.

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

We have had no disagreements with our accountants on any accounting or financial disclosures.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures

We carried out an evaluation, with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2006. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2006, our disclosure controls and procedures, as defined in Rule 13a-15(e), were not effective to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2006 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. In connection with this evaluation, management and Grant Thornton LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, have identified material weaknesses in our internal control over financial reporting. As a result of the material weaknesses set forth below, our principal executive officer and our principal financial officer have concluded that, as of the end of the period covered by this report, our internal control over financial reporting was not effective.

Grant Thornton LLP has audited our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, as stated in their report which is included herein.

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Disclosure Control Ineffectiveness

An investigation over the Company’s stock-based compensation practices disclosed deficiencies that include an absence of formality, incomplete authorization and documentation of stock option grants, inappropriate accounting for stock option grants, and insufficient internal controls governing the stock option granting, exercise and accounting processes. Additionally, an adjustment for $1.0 million was initiated by the principal financial officer that corresponded in timing and amount to an audit adjustment proposed by the auditors. The adjustment was recorded in the Company’s records with the effect of offsetting the proposed adjustment. The timing and complete facts surrounding the adjustment may not have been fully communicated or understood by all approving parties prior to the adjustment being recorded. The adjustment was subsequently reversed after the Company completed its analysis.

Internal Control Over Financial Reporting Weaknesses

A material weakness was identified with respect to deficiencies related to the documentation, authorization, accounting and related processes for stock option grants and adjustments in the financial reporting close process. Absent control improvements including oversight, a material misstatement could occur in the annual or interim financial statements. While we have identified additional control improvements, such controls were not operating effectively at December 31, 2006.

Changes in Internal Control Over Financial Reporting

Our management carried out an evaluation, with the participation of our principal executive officer and principal financial officer, of changes in our internal control over financial reporting, as defined in Rule 13a-15(f). Based on this evaluation, our management determined that no change in our internal control over financial reporting occurred during the fourth quarter of fiscal 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The anticipated changes in our internal control over financial reporting necessary to remedy the weaknesses identified above will be implemented subsequent to the year ended December 31, 2006.

ITEM 9B.    OTHER INFORMATION

We have disclosed all information required to be disclosed in a current report on Form 8-K during the fourth quarter of the year ended December 31, 2006 in previously filed reports on Form 8-K.

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PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following information is set forth with respect to our directors and the persons nominated for election as a director.

Name	Age	Positions	Director    Since	Term Expires
Tilman J. Fertitta (3)	50	President, Chief Executive Officer and Director	1993	2007
Steven L. Scheinthal (3)	45	Executive Vice President and General Counsel, Secretary and Director	1993	2007
Kenneth Brimmer (1)(4)	52	Director	2004	2007
Michael S. Chadwick (1)(2)	55	Director	2001	2007
Michael Richmond (1)(2)	59	Director	2003	2007
Joe Max Taylor (2)(4)	74	Director	1993	2007

(1) Member of Audit Committee

(2) Member of Compensation Committee

(3) Member of Executive Committee

(4) Member of Nominating and Corporate Governance Committee

Mr. Fertitta has served as our President and Chief Executive Officer since 1987. In 1988, he became the controlling stockholder and assumed full responsibility for all of our operations. Prior to serving as our President and CEO, Mr. Fertitta devoted his full time to the control and operation of a hospitality and development company. Mr. Fertitta serves on numerous boards and charitable organizations.

Mr. Scheinthal has served as our Executive Vice President or Vice President of Administration, General Counsel and Secretary since September 1992. He devotes a substantial amount of time to lease and contract negotiations and is primarily responsible for our compliance with all federal, state and local ordinances. Prior to joining us, he was a partner in the law firm of Stumpf & Falgout in Houston, Texas. Mr. Scheinthal represented us for approximately five years before becoming part of our company. He has been licensed to practice law in the state of Texas since 1984.

Mr. Brimmer is the CEO and Chairman of the Board of STEN Corporation, a publicly-traded, diversified business. Mr. Brimmer has served as a director of STEN Corporation since 1998 and has been CEO of STEN Corporation since October 2003. From April 2000 until June 2003, he served as Chairman and Director of Active IQ Technologies, Inc. and was CEO from April 2000 until December 2001. Previously, Mr. Brimmer was President of Rainforest Cafe, Inc. from April 1997 until April 2000 and was Treasurer from its inception in 1995 until April 2000. Prior to that, Mr. Brimmer was employed by Grand Casinos, Inc. and its predecessor from 1990 until April 1997. Mr. Brimmer also is a director and serves on both the Audit and Compensation Committees of Hypertension Diagnostics. He has a degree in accounting and worked as a CPA in the audit division of Arthur Andersen & Co. from 1977 through 1981. Mr. Brimmer was elected to our Board of Directors in 2004.

Mr. Chadwick has been engaged in the commercial and investment banking businesses since 1975. From 1988 to 1994, Mr. Chadwick was President of Chadwick, Chambers & Associates, Inc., a private merchant investment banking firm in Houston, Texas, which he founded in 1988. In 1994, Mr. Chadwick joined Sanders Morris Harris, an investment banking and financial advisory firm, as Senior Vice President and a Managing Director in the Corporate Finance Group. Mr. Chadwick was elected to our Board of Directors in 2001.

Mr. Richmond currently serves as a Director and Vice Chairman of Woodforest National Bank, a Houston area-based bank. Prior to joining Woodforest National Bank in January 2003, Mr. Richmond worked for The

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Woodlands Operating Company, L.P., a developer specializing in master-planned communities, commercial and investment properties, from 1972 to 2002. Mr. Richmond served as President and CEO from 1998-2002 and held such other titles as COO, Senior Vice President of Financial Operations, Treasurer, and Controller. Mr. Richmond has been a certified public accountant since the 1970’s. Mr. Richmond was elected to our Board of Directors in 2003.

Mr. Taylor was formerly the chief law enforcement administrator for Galveston County, Texas. He has served as a Director and Executive Committee member of American National Insurance Company, a publicly-traded insurance company, for ten years and served on the Board of Directors of Moody Gardens, a hospitality and entertainment complex located in Galveston, Texas. Mr. Taylor was elected to our Board of Directors in 1993.

EXECUTIVE OFFICERS

In addition to Messrs. Fertitta and Scheinthal, for which information is provided above, the following persons are executive officers:

Name	Age	Position	Officer   Since
Richard (“Rick”) H. Liem	53	Executive Vice President and Chief Financial Officer	2004
Jeffrey L. Cantwell	42	Senior Vice President of Development	2006
K. Kelly Roberts	48	Chief Administration Officer – Hospitality and Gaming Division	2007

Mr. Liem serves as Executive Vice President and Chief Financial Officer and has served as Senior Vice President of Finance since June 2004. He started with us in 1999 as the Vice President of Accounting or Corporate Controller. Mr. Liem joined us from Carrols Corporation, a restaurant company located in Syracuse, NY, where he was the Vice President of Financial Operations from 1994 to 1999. He was with the audit division of Price Waterhouse, L.L.P. from 1983 to 1994. Mr. Liem is a certified public accountant.

Mr. Cantwell serves as Senior Vice President of Development and has served as Vice President of Development, and Director of Design and Construction. He was promoted to an executive officer in 2006. He has been employed by us since his graduation from Southwest Texas State University in June, 1992. While in college, he worked in many of our restaurants and developed a significant understanding of restaurant operations.

Mr. Roberts serves as Chief Administration Officer – Hospitality and Gaming Division and has served as Chief Financial Officer – Hotel Division and Controller – Hotel Division. He has been employed by the Company since 1996. He has over 25 years experience in the hospitality business in finance and operations working for various hotel chains and independent management companies. He also currently serves on the executive board of the Greater Houston Convention and Visitor’s Bureau.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock. We believe, based solely on a review of the copies of such reports furnished to us and on written representations from our existing directors and executive officers, that all existing directors and executive officers and holders of more than 10% of our common stock subject to the reporting requirements of Section 16(a) have filed on a timely basis all reports required during, or with respect to, the year ended December 31, 2006.

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Codes of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that is applicable to all of our directors, officers and other employees. The Code is posted under the Corporate Governance portion of the Investor Relations section on our website at www.LandrysRestaurants.com and is available to any stockholder upon request. We have also adopted a Code of Ethics Statement by the CEO and senior financial officers, which is filed with the SEC as an exhibit to our 2003 Annual Report on Form 10-K. If there are any changes or waivers of the Code of Business Conduct and Ethics which applies to the CEO and senior financial officers, we will disclose it on our website in the same location. Our Code of Business Conduct and Ethics or Code of Ethics Statement can also be obtained free of charge by directing a written request to Steven L. Scheinthal, Secretary, Landry’s Restaurants, Inc., 1510 West Loop South, Houston, Texas, 77027.

Communications to Non-Employee Directors

The Board provides a process for stockholders and other interested persons to send communications to the non-employee directors as a group or any of the other directors, including the entire Board. Stockholders and other interested persons may send written communications to the non-employee directors or any of the other directors to Steven L. Scheinthal, Secretary, Landry’s Restaurants, Inc. 1510 West Loop South, Houston, Texas, 77027. The Secretary will review, sort and summarize the communications and forward them to the intended recipient(s) on a periodic basis, but no less frequently than every calendar quarter.

Director Independence

As set forth in the Company’s “Corporate Governance Guidelines,” which are available on our website at www.LandrysRestaurants.com under “Corporate Governance,” it is the policy of the Board of Directors that a majority of the members of the Board be independent of the Company’s management. For a director to be deemed “independent,” each independent director must meet the independence requirements of the New York Stock Exchange and applicable state and federal law, including the rules and regulations of the SEC, including the following requirements:

• No director who is an employee, or whose immediate family member is an executive officer of the Company is independent until three years after the end of such employment relationship.

• No director who receives, or whose immediate family member receives, more than $100,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is independent until three years after he or she ceases to receive more than $100,000 per year in such compensation.

• No director who is affiliated with or employed by, or whose immediate family member is affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the Company is independent until three years after the end of the affiliation or the employment of such auditing relationship.

• No director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of the Company’s present executives serve on that company’s compensation committee is independent until three years after the end of such service or the employment relationship.

• No director who is an executive officer or an employer, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, is independent until three years after falling below such threshold.

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The definition of independence and compliance with these guidelines will be reviewed periodically by the Nominating and Corporate Governance Committee. The Board believes that directors who are also employees of the Company should be limited only to those officers whose positions make it appropriate for them to sit on the Board.

Our Board of Directors has determined that the following majority of directors—Kenneth Brimmer, Michael S. Chadwick, Michael Richmond and Joe Max Taylor—qualify as independent under the applicable New York Stock Exchange standards as well as the Company’s standards for director independence.

One of the Company’s independent non-employee directors serves as the “Presiding Director” of executive sessions of the non-employee directors of the Company, which are held at every meeting of the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

We have an Executive Committee, an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. We have reviewed our committee structure in order to fully satisfy the existing rules of the SEC and NYSE and believe that it satisfies all of such rules. Copies of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee Charters are available under the Corporate Governance portion of the Corporate Relations section of our website at www.LandrysRestaurants.com.

There were ten meetings of the Executive Committee, five meetings of the Audit Committee, three meetings of the Compensation Committee, two meetings of the Nominating and Corporate Governance Committee and eleven meetings of the Company’s Board of Directors held during 2006. All of the current Board members attended 75% or more of the meetings of the Board and of the committees of the Board on which they were members. It is the policy of the Board that, to the extent possible, all Directors attend the Annual Meeting of Stockholders. All Directors attended the 2006 Annual Meeting of Stockholders.

Audit Committee

The Audit Committee consists of three independent Non-Employee Directors. The members of the Audit Committee during 2006 were Michael Chadwick (Chairman), Michael Richmond and Kenneth Brimmer. The Audit Committee’s primary purpose is to assist the Board of Directors’ oversight of (a) the integrity of our financial statements and disclosures; (b) our compliance with legal and regulatory requirements; (c) the independent auditor’s qualifications and independence; and (d) the performance of our internal audit and independent auditors. The Audit Committee has the sole authority to appoint and terminate our independent auditors. In addition, during 2006-2007, the Audit Committee has acted as a special committee to conduct an internal investigation with respect to the Company’s past stock option granting practices and derivative lawsuit. Our Board of Directors has determined that Mr. Chadwick, Chairman of the Audit Committee, is an “audit committee financial expert” as described in Item 401(h) of the SEC’s Regulation S-K. In addition, the Board of Directors has determined that each member of the Audit Committee is independent, as independence for audit committee members is defined in the listing standards of the NYSE. The Audit Committee is established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee consists of two Independent Non-Employee Directors. The current members of the Nominating and Corporate Governance Committee are Mr. Taylor (Chairman) and Mr. Brimmer. The Nominating and Corporate Governance Committee is charged with identifying and making recommendations to the Board of Directors of individuals suitable to become members of the Board of Directors and in overseeing the administration of our various policies related to corporate

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governance matters. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent, as independence for nominating committee members is defined in the listing standards of the NYSE.

Nominating and Corporate Governance Committee Director Nominations

The Nominating and Corporate Governance Committee has established criteria for the selection and recommendation of candidates to become nominees submitted by the Board of Directors for election to the Board of Directors by our stockholders. The Committee selects each recommended nominee based on the nominee’s experience, independence and availability. As set forth in our Corporate Governance Guidelines, the following criteria are considered in selecting candidates for the Board of Directors: a high degree of personal and professional ethics, integrity and values, an independent mind and mature judgment. In addition, candidates are to be involved only in activities or interests that would not create a conflict with potential directorial responsibilities to us and our stockholders.

When soliciting candidates for Director, the Nominating and Corporate Governance Committee may solicit suggestions from incumbent Directors, management and stockholders. While the Committee has authority under its charter to retain a search firm for this purpose, no such firm was utilized in 2006. If the Committee believes a candidate would be a valuable addition to the Board of Directors, it will recommend that candidate’s election to the full Board of Directors.

Stockholder Nominations

The Charter of the Nominating and Corporate Governance Committee provides that the Committee will consider proposals for nominees for Director from stockholders. Stockholder nominations for Director should be made in writing to Mr. Steven L. Scheinthal, Secretary, Landry’s Restaurants, Inc., 1510 West Loop South, Houston, Texas 77027. In order to nominate a Director at the Annual Meeting, we require that a stockholder follow the procedures set forth herein. In order to recommend a nominee for a Director position, a stockholder must be a stockholder of record at the time he, she or it gives notice of recommendation and must be entitled to vote for the election of Directors at the meeting at which such nominee will be considered. Stockholder recommendations must be made pursuant to written notice delivered to the Secretary at our principal executive offices (i) in the case of a nomination for election at an annual meeting, not less than 60 days prior to the first anniversary of the date of our notice of annual meeting for the preceding year’s annual meeting; and (ii) in the case of a special meeting at which Directors are to be elected, not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the meeting and of the nominees proposed by the Board of Directors to be elected at the special meeting. In the event that the date of the annual meeting is changed by more than 30 days from the anniversary date of the preceding year’s annual meeting, the stockholder notice described above will be deemed timely if it is received not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.

The stockholder notice must set forth the following:

• As to each person the stockholder proposes to nominate for election as a Director, all information relating to such person that would be required to be disclosed in solicitations of proxies for the election of such nominees as Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and such person’s written consent to serve as a Director if elected; and

• As to the nominating stockholder and the beneficial owner, if any, on whose behalf the nomination is made, such stockholder’s and beneficial owner’s, name and address as they appear on our books, the class and number of shares of our common stock which are owned beneficially and of record by such stockholder and such beneficial owner, and an affirmative statement of whether either such stockholder or such beneficial owner intends to deliver a proxy statement and form of proxy to a sufficient number of stockholders to elect such nominee or nominees.

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In addition to complying with the foregoing procedures, any stockholder nominating a director must also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder.

Compensation Committee

The Compensation Committee is comprised entirely of independent Non-Employee Directors, as defined by the NYSE, and the Exchange Act and independent outside directors as defined under Section 162(m) of the Internal Revenue Code. The members of the Compensation Committee during 2006 were Michael Chadwick, Michael Richmond and Joe Max Taylor (Chairman). The Compensation Committee is responsible for our executive compensation program. Generally, the Compensation Committee is charged with the authority, to review and approve our compensation philosophy and our executive compensation programs, levels, plans and awards. The Compensation Committee also administers our incentive plans and other stock-based plans and reviews and approves general employee benefit plans on an as-needed basis. The Compensation Committee also has the authority to retain, approve fees and other terms for, and terminate any compensation consultant, outside counsel, accountant or other advisor hired to assist the Compensation Committee in the discharge of its responsibilities.

ITEM 11.    COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis explains the philosophy underlying our compensation strategy and the fundamental elements of compensation paid to our Chief Executive Officer, Chief Financial Officer, and other individuals, whom we refer to as “executive officers,” included in the Summary Compensation Table for the 2006 calendar year. Specifically, this Compensation Discussion and Analysis addresses the following:

• Objectives of our compensation programs;

• What our compensation programs are designed to reward;

• Elements of our compensation program and why we pay each element;

• How we determine each element of compensation; and

• Other important compensation policies affecting the executive officers.

Objectives of Our Compensation Program. Our business strategy is to develop and operate a diversified restaurant, hospitality and entertainment company offering customers unique dining, leisure and entertainment experiences. We believe that this strategy creates a loyal customer base, generates a high level of repeat business and provides superior returns to our investors. Our compensation program is designed to attract, retain and motivate employees in order to effectively execute our business strategy.

What Our Compensation Program Is Designed to Reward. Our compensation program is designed to reward performance of executive officers that contributes to the achievement of our business strategy on both a short-term and long-term basis. We reward qualities that we believe help achieve our strategy such as teamwork, individual performance in light of general economic and industry specific conditions, individual performance that supports our core values, resourcefulness, the ability to manage our business, level of job responsibility and tenure with us.

Elements of Our Compensation Program and Why We Pay Each Element. The Compensation Committee believes that the compensation packages for executive officers should consist of the following components:

• base salary;

• annual incentive bonus;

• long-term equity awards;

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• deferred compensation;

• perquisites; and

• broad-based employee benefits.

We pay base salary in order to recognize each executive officer’s unique value and historical contributions to our success in light of salary norms in the industry and the general marketplace, to match competitors for executive talent, to provide executives with regularly-paid income, and to reflect position and level of responsibility.

We include an annual cash bonus as part of our compensation program because we believe this element of compensation helps to motivate management to achieve key corporate objectives by rewarding the achievement of these objectives. We also provide an annual cash bonus in order to be competitive from a total remuneration standpoint.

Long-term equity-based incentive compensation in the form of options and restricted stock is an element of our compensation policy because we believe it aligns executives’ interests with the interests of our stockholders, rewards long-term performance, is required in order for us to be competitive from a total remuneration standpoint, to encourage executive retention, and to give executives the opportunity to share in our long-term performance. These types of awards also provide a form of compensation that we believe is transparent and easy for stockholders to understand.

Deferred compensation benefits are intended to promote retention by providing a long-term savings opportunity on a tax-efficient basis.

We provide perquisites to our executive officers, since we believe this compensation helps us achieve our compensation objectives of recruiting and retaining executive officers and generally allows our executives to work more efficiently and protects the well being of our executives.

We offer broad-based employee benefits such as payment of insurance premiums in order to provide a competitive remuneration package and as an essential component of recruiting and retaining executive talent.

How We Determine Each Element of Compensation.

Role of Our Compensation Committee and CEO. The Compensation Committee regularly reviews and approves our executive compensation strategy and principles to ensure that they are aligned with our business strategy and objectives, stockholder interests, desired behaviors and corporate culture. The primary responsibilities of the Compensation Committee are to:

• conduct an annual review of all compensation elements for our executive officers;

• review the performance of the CEO and meet to discuss the findings of the review; and

• review and approve our management development and succession planning practices and strategies.

The Compensation Committee considers multiple factors when it determines the amount of total direct compensation (the sum of base salary, incentive bonus and long-term compensation delivered through equity awards) to award to executive officers each year. Among these factors are:

• how proposed amounts of total direct compensation to our executives compare to amounts paid to similar executives both for the prior year and over a multi-year period;

• internal pay equity considerations; and

• broad trends in executive compensation generally.

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The Compensation Committee relies upon its judgment in making compensation decisions, after reviewing our performance and carefully evaluating an executive’s performance during the year. The Committee generally does not adhere to rigid formulas or necessarily react to short-term changes in business performance in determining the amount and mix of compensation elements. We incorporate flexibility into our compensation programs and in the assessment process to respond to and adjust for the evolving business environment. As a result, the Compensation Committee has not adopted any policy or guidelines for allocating compensation between long-term and currently paid out compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.

In addition, the CEO recommends to the Compensation Committee annual pay increases, annual bonus amounts and long-term incentive grants for other executive officers. To assist it in carrying out its responsibilities, the Compensation Committee may also receive reports and recommendations from outside compensation consultants, and may consult with its own legal, accounting or other advisors. However, to date the Compensation Committee has not used independent legal or accounting advisors. The Compensation Committee has the sole authority, to the extent deemed necessary and appropriate, to retain and terminate any compensation consultants, outside counsel or other advisors, including having the sole authority to approve the firm’s or advisor’s fees and other retention.

Compensation Consultant. In 2006, the Compensation Committee engaged Pearl Meyer & Partners as a compensation consultant to assist the Committee with its administration of compensation programs. Pearl Meyer & Partners performed market analyses of executive compensation practices from which it made recommendations to the Compensation Committee as to the form and amount of certain executive compensation for the CEO. Pearl Meyer & Partners is independent of us, reports directly to the Compensation Committee and has no other business relationship with us other than assisting the Compensation Committee with its executive compensation practices. Pearl Meyer & Partners is a subsidiary of Clark Consulting which administrates the Company’s deferred compensation plan.

Benchmarking. The Compensation Committee does not use benchmarking to set executive compensation. However, the Compensation Committee does utilize survey data and publicly available information to evaluate compensation for specific positions when necessary.

Base Salary. Base salaries for executive officers are reviewed on an annual basis and at the time of promotion or other change in responsibilities. Increases in salary are based on cost of living adjustments as well as subjective evaluation of such factors as the level of responsibility, individual performance, our overall performance, level of pay both of the executive in question and other similarly situated executives pay levels within the Company.

The base salary for our CEO was established in an employment agreement we entered into with him in 2003. The initial base salary under the employment contract was based on a previous report prepared by Pearl Meyer & Partners and factors taken into account in determining the CEO’s base salary were his leadership position with the Company, his level of responsibility and the integral, dynamic role he plays in guiding the Company. Since 2003, his base salary has increased based primarily on cost of living increases, as well as the other factors set forth under “Base Salary” above. The CEO’s salary was increased from $1,350,000 in 2005 to $1,450,000 for 2006.

The Compensation Committee discusses the remaining executive officers’ base salaries with the CEO, who presents his suggestions for adjustment, if necessary. For 2006, except for the CFO, the base salaries of the executive officers named in the Summary Compensation Table, whom we sometimes refer to as the “named executive officers,” were adjusted primarily to take into account a cost of living increase as well as the other factors set forth under “Base Salary” above. In addition, the Committee has the discretion to periodically approve additional salary adjustments it feels are warranted based on general compensation changes within the industry, individual performance or significant changes in duties and responsibilities and input from the CEO. The

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Compensation Committee increased the base salary of our CFO to take into account the same cost of living increase as well as to make his salary more competitive with similarly situated executives.

Annual Bonus. Executive officers, senior management and other personnel have the potential to receive a significant portion of their annual cash compensation as a cash bonus. Annual bonuses are generally granted based on each executive officer’s base salary, tenure, individual performance and our financial and market performance. The Compensation Committee does not establish any particular guidelines or financial measures. Rather, the Compensation Committee prefers to make a subjective determination after considering all measures collectively but bases much of its determination upon input from the CEO. The Compensation Committee approves each annual bonus. Typically, bonuses are awarded for prior year results in the following year, when actual results for the entire year are known.

When awarding 2006 bonuses, in addition to the above factors the Compensation Committee in particular considered the executive officers’ performance and outstanding contribution with respect to the acquisition, renovation and subsequent increase in value of the Golden Nugget, Inc. as well as their contributions to the disposition of less profitable businesses such as the Joe’s Crab Shack chain. Each of these transactions were accomplished by a small group of executives in a short period of time and added significantly, in the Compensation Committee’s view, to the long-term value of the Company.

Long-Term Incentive Compensation. The Compensation Committee administers our incentive plans and performs functions that include selecting award recipients, determining the timing of grants and assigning the number of shares awarded, fixing the time and manner in which awards are exercisable, setting option exercise prices and vesting and expiration dates, and from time to time adopting rules and regulations for carrying out the purposes of our plans. For compensation decisions regarding the grant of equity compensation to executive officers, the Compensation Committee typically considers the competitive environment associated with longer- term compensation and recommendations from our CEO. Beginning in 2006, the Committee adopted a general policy to grant restricted stock in lieu of options due to the many variables in valuing option awards.

In connection with this new policy, the Company amended its employment agreement with the CEO effective March 14, 2006. Previously, the employment agreement provided that the CEO was entitled to an aggregate of 800,000 stock options over the term of the agreement, of which 250,000 were issued in 2004. After the Committee determined it was in the Company’s best interest to issue restricted stock rather than options, the Committee, based on the recommendation of Pearl Meyer & Partners, issued 275,000 shares of restricted stock to the CEO in place of the remaining 550,000 options. The restricted shares vest seven years from the date of grant. On February 1, 2006, the CEO was granted 100,000 shares of restricted stock in accordance with the terms of the employment agreement.

Except for under the CEO’s employment agreement, we have no set formula for the granting of equity awards to individual executives or employees. In April 2006, the Compensation Committee approved the award of an aggregate of 137,412 shares of common stock representing approximately .62% of the outstanding common shares on the date of grant.

In determining the size of restricted stock grants awarded to executive officers, the Compensation Committee based its determinations on such considerations as tenure, the strategic long-term importance of the executive to us, historical equity compensation awards and the recommendation of the Compensation Committee’s compensation consultant, Pearl Meyer & Partners. In general, the restricted stock granted to executive officers vests in five equal annual installments beginning April 6, 2007. Our equity compensation plans are generally limited to our executive and more senior management, with approximately 75 employees receiving restricted stock awards in fiscal 2006.

We do not have any program, plan or obligation that requires us to grant equity compensation on specified dates. However, our Committee does follow a policy of not granting equity incentives when material non-public

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information exists that may affect the short-term price of our stock. Information about unvested restricted stock and outstanding options held by our named executive officers and directors is contained in the “Outstanding Equity Awards at December 31, 2006” and “Director Compensation” tables.

Deferred Compensation Plan. Executive officers and our most highly compensated senior management are eligible to participate in our deferred compensation plan, which provides an opportunity for eligible employees to defer up to 90% of their annual base salary and 100% of bonus compensation into an account that will be credited with earnings at the same rate as one or mere investment indices chosen by the employees, which are similar to the investment funds available under our 401(k) plan. We also make a matching contribution of up to 30%, depending on the position of the employee with us.

Perquisites. We also provide certain personal benefits to executive officers, which are reflected in the All Other Compensation column of the Summary Compensation Table. These benefits include executive life and disability insurance and a car allowance. We believe these benefits are reasonable, competitive and consistent with our overall executive compensation program. Under a program to enhance the safety and effectiveness of management in support of our business and operations, corporate-owned aircraft is made available for essential business trips and other company activities. The CEO, the chief financial officer and other members of management with the approval of the CEO, are permitted limited personal use of the corporate-owned aircraft. Also, the CEO is provided security services, including home security systems and monitoring and personal security services. These security services are provided for our benefit, and the Compensation Committee considers the related expenses to be appropriate business expenses rather than personal benefits. In general, the perquisites our CEO is entitled to receive are contained in his employment agreement and are described in more detail under “Employment Agreements.”

Broad-Based Employee Benefits. Our executive officers are eligible to participate in company-sponsored benefit programs on the same terms and conditions as those generally provided to our employees. We believe that the offering of broad-based employee benefits to our executive officers is essential to achieving our goal of recruiting and retaining executive talent. These benefits include basic health benefits, dental benefits, disability protection, life insurance, and similar programs. The cost of company-sponsored benefit programs are negotiated by us with the providers of such benefits and the executive officers contribute to the cost of the benefits. We have a 401(k) plan and make annual matching contributions to the 401(k) plan on behalf of eligible employees. These contributions are discretionary and historically limited to 25% on up to 5% of contributed funds.

Other Compensation Policies Affecting the Executive Officers

Compliance with Section 162(m) of the Internal Revenue Code. Section 162(m) disallows a federal income tax deduction to publicly held companies for certain compensation paid to our CEO and four other most highly compensated executive officers to the extent that compensation exceeds $1 million per executive officer covered by Section 162(m) in any fiscal year. The limitation applies only to compensation that is not considered “performance based” as defined in the Section 162(m) rules.

In designing our compensation programs, the Compensation Committee considers the effect of Section 162(m) together with other factors relevant to our business needs. We have historically taken, and intend to continue taking, appropriate actions, to the extent we believe desirable, to preserve the deductibility of annual incentive and long-term performance awards. However, the Compensation Committee has not adopted a policy that all compensation paid must be tax-deductible and qualified under Section 162(m).

We believe that the 2006 base salary, annual bonus and restricted stock grants paid to the individual executive officers covered by Section 162(m) will not exceed the Section 162(m) limit and will be fully deductible under Section 162(m), except for a portion paid to the CEO.

Other compensation paid to the executive officers covered by Section 162(m) that is not considered “performance-based” is not deductible to the extent that it, together with other non-performance based

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compensation, exceeds $1 million in any fiscal year. For fiscal 2006, these amounts included the CEO’s income imputed for personal use of corporate aircraft and life and insurance premiums paid by us.

Stock Ownership Requirements. The Compensation Committee does not maintain a policy relating to stock ownership guidelines or requirements for our executive officers because the Compensation Committee does not feel that it is necessary to impose such a policy on our executive officers. If circumstances change, the Compensation Committee will review whether such a policy is appropriate for executive officers.

Financial Restatement. In the event of a material restatement our financial results, we believe it would be prudent to carefully review the facts and circumstances that caused the restatement before determining the appropriate course of action. Upon completion of an investigation of the facts and circumstances surrounding a material restatement, we would consider: (1) whether any compensation was paid or awarded on the basis of having achieved performance targets, (2) whether a particular employee or officer was engaged in misconduct that contributed to the restatement, and (3) whether the compensation paid to the employee or officer would have been reduced had the financial results been properly reported. If it is determined that an employee or officer did engage in misconduct, the Board of Directors would take action as it deems appropriate.

Employment Agreements. In general, our executive officers do not have employment, severance or change-of-control agreements. Our executive officers serve at the will of the Board, which enables us to terminate their employment with discretion as to the terms of any severance arrangement. This is consistent with our compensation philosophy. However, in 2003, we determined that the loss of our CEO’s services could materially and adversely affect our business, financial condition and development. Accordingly, we entered into an employment agreement with our CEO. This employment agreement contains change of control provisions that provide for severance benefits upon a change of control. The provisions of this employment agreement are discussed more under the caption “Employment Agreements and Potential Payments Upon Termination or Change of Control” below.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors acts on behalf of the Board to establish and oversee our executive compensation program in a manner that serves our interests and those of our shareholders. Our management has prepared the Compensation Discussion and Analysis of the compensation program for named executive officers. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis for fiscal year 2006 (included in this Form 10-K) with our management. Based on this review and discussion, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Form 10-K for filing with the Securities and Exchange Commission.

Compensation Committee

Joe Max Taylor, Chair

Michael Chadwick

Michael Richmond

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth in summary, compensation paid by us and our subsidiaries for the year ended December 31, 2006 to our CEO, CFO and our other most highly compensated executive officers whose cash compensation exceeded $100,000:

Name and Principal Position	Year	Salary ($)	Bonus ($)(1)	Stock Awards($)(3)	Option Awards($)(5)	All Other Compen- sation ($)	Total ($)
Tilman J. Fertitta, (2) President and Chief Executive Officer	2006	1,450,000	1,585,000	11,410,500	—	883,409	15,328,909
Richard H. Liem, Executive Vice President and Chief Financial Officer	2006	275,000	200,000	525,000	—	41,865	1,041,865
Steven L. Scheinthal, Executive Vice President, Secretary and General Counsel	2006	350,000	385,000	700,000	152,254	69,847	1,657,101
Jeffrey L. Cantwell, Senior Vice President of Development	2006	225,962	75,000	150,000	112,618	24,419	587,999
K. Kelly Roberts, Chief Administration Officer—Hospitality and Gaming Division	2006	200,000	85,000	100,000	39,717	15,519	440,236
Richard E. Ervin, (4) Executive Vice President of Restaurant Operations	2006	248,846	288,000	350,000	—	1,130,611	2,017,457

(1) Bonuses were paid in 2007 to reflect accomplishments in 2006.

(2) See the “All Other Compensation” table below for additional information. Moreover, “All Other Compensation” includes dividends on restricted stock grants in the amount of $116,500 for 2006.

(3) Amounts shown reflect the accounting expense recognized by the Company for financial statement reporting purposes in accordance with the provisions of Statement of Financial Accounting Standards No. 123R, “Share-Based Payments” and do not reflect whether the named executive officer has actually realized a financial benefit from the award.

(4) Mr. Ervin, who had primary operating oversight with respect to the Joe’s Crab Shack restaurant chain, resigned on November 17, 2006 in connection with our sale of the Joe’s Crab Shack chain. His bonus/severence is to be paid out over three years.

(5) The sums listed in the Option Awards Table were expensed by the Company in 2006 for certain named executives in connection with the Company’s stock option review. No options were awarded to any of these executives in 2006.

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All Other Compensation

The following table describes each component of the All Other Compensation column in the Summary Compensation Table. All numbers are in dollars.

Name of Executive	Deferred Compensation (1)		Life Insurance Premiums (2)		Personal Use of Corporate Aircraft (3)		Auto Expense (4)		Use of Company Personnel (5)		Security (6)		Other (7)
Tilman J. Fertitta	$	3,000	$	283,680	$	31,920	$	—	$	130,500	$	246,912	$	187,397
Richard H. Liem	$	12,000	$	4,365	$	—	$	24,000	$	—	$	—	$	1,500
Steven L. Scheinthal	$	12,000	$	26,362	$	—	$	16,637	$	—	$	—	$	14,848
Jeffery L. Cantwell	$	9,055	$	2,935	$	—	$	12,000	$	—	$	—	$	429
Richard E. Ervin	$	—	$	8,986	$	—	$	22,000	$	—	$	—	$	1,099,625	(8)
K. Kelly Roberts	$	3,120	$	3,115	$	—	$	9,000	$	—	$	—	$	284

(1) This column reports our contribution under our deferred compensation plan.

(2) This column reports the dollar value of any life insurance premium paid by the Company on behalf of the named executive officers.

(3) This column includes the incremental cost for the executive officer’s personal use of our aircraft. The calculation includes the variable costs incurred as a result of personal flight activity such as: trip related maintenance, aircraft fuel, satellite communications, landing fees and any travel expenses for the flight crew. It excludes non-variable costs, such as hangar expense, ongoing maintenance, purchase and lease costs of the aircraft, exterior paint, interior refurbishment and regularly scheduled inspections, which would have been incurred regardless of whether there was any personal use of aircraft. The incremental cost incurred by us has been determined to be approximately $2,100 per flight hour based on the foregoing incremental costs. On certain occasions when Mr. Fertitta is traveling for business purposes family members will travel with him and there is no incremental cost to the Company.

(4) This column reports the incremental cost to the Company for automobile expenses for the named executive officers. Although under Mr. Fertitta’s employment agreement the Company is to provide him with an automobile, during 2006 he did not have a Company car and the Company did not pay any automobile related expenses on his behalf.

(5) Represents the incremental cost to the Company with respect to use of Company personnel provided to Mr. Fertitta under his employment agreement.

(6) This column reports the actual cost of providing security services to Mr. Fertitta as provided for in his employment agreement. Under our executive security program, Mr. Fertitta has been provided security services, including home security systems and monitoring and personal security services. We provide these security services for our benefit and consider the related expenses to be appropriate business expenses.

(7) This column reports the total amount of other benefits provided, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for the named executive (except as otherwise described herein). With respect to Mr. Fertitta, these amounts represent: (a) supplemental medical reimbursement, (b) dockage fees, (c) membership fees and dues for country clubs, (d) administrative support services and financial service fees for tax preparation, estate planning and legal or financial advice to which Mr. Fertitta is entitled under his employment agreement, and (e) dividends on restricted common stock. “All Other Compensation” does not include contributions and matching contributions to charities in accordance with Mr. Fertitta’s employment agreement. With respect to the remaining named executive officers and other than as described in footnote (8) below, these amounts represent among other things, dividends on restricted common stock and medical reimbursements.

(8) Includes cash consideration of $1,095,625, representing the equity value of vested stock options to purchase 77,500 shares of common stock, paid by the Company to Mr. Ervin in connection with his departure as part of the sale of the Joe’s Crab Shack restaurant chain. The equity value was determined based on the closing price on the NYSE of the Company’s common stock on December 5, 2006, the date the transaction was approved by the Company’s Board of Directors. The exercise price of a portion of these options was

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adjusted upwards in December 2006. See “Section 409A Compliance” for more information regarding the adjustment of the exercise price.

GRANTS OF PLAN-BASED AWARDS

The following table provides details regarding equity grants in 2006 to executive officers named in the Summary Compensation Table. No stock options were granted to executive officers last year and thus any reference to options in the table below have been omitted.

Name	Grant Date	All Other Stock Awards: Number of Shares	Grant Date Fair Value of Stock Award ($)(4)
Tilman J. Fertitta (1)	02-09-06	100,000	2,946,000
	03-14-06	275,000	8,464,500
Richard H. Liem (2)	04-06-06	15,000	525,000
Steven L. Scheinthal (2)	04-06-06	20,000	700,000
Jeffrey L. Cantwell (2)	04-06-06	4,285	150,000
Richard E. Ervin (2)(3)	04-06-06	10,000	350,000
K. Kelly Roberts (2)	04-06-06	2,856	100,000

(1) The following describes the material terms of the restricted stock awards granted to our CEO in February and March 2006:

• The February award becomes vested and payable on January 1, 2016, and is payable, in shares of our common stock. The March award becomes vested and payable on the seventh anniversary of the grant date, and is payable, in shares of our common stock.

• We are responsible for the payment of all federal and state income taxes owed by our CEO in connection with his receipt of all vested shares.

• Cash dividends are payable prior to vesting at the same time and in the same amount as if the awards were issued and outstanding shares of our common stock.

• The following chart shows the impact on vesting in case of termination of employment before the vesting date:

Reason for Termination	Impact on Vesting
Death, disability or termination without cause, termination following a change of control, or resignation due to constructive termination	Full Vesting
Termination for cause	Forfeiture

(2) The following describes the material terms of the restricted stock awards granted to our executive officers in April 2006:

• These awards become vested in equal annual installments over five years commencing April 6, 2007 in shares of our common stock, subject to applicable taxes.

• Cash dividends are payable prior to vesting at the same time and in the same amount as if the awards were issued and outstanding shares of our common stock.

• The following chart shows the impact on vesting in case of termination of employment before the vesting date:

Reason for Termination	Impact on Vesting
Death or disability or following a change of control	Full Vesting
Termination with or without cause	Forfeiture

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(3) All of Mr. Ervin’s restricted stock was forfeited on November 17, 2006 in connection with his termination of employment.

(4) The dollar values stated for the restricted stock awards reflect the number of shares granted in 2006 multiplied by the fair value in accordance with SFAS 123R.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table contains information with respect to outstanding equity awards at our fiscal year end on December 31, 2006.

	Option Awards					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($) (1)
Tilman J. Fertitta (3)	150,000		—	12.88	4/18/2007	675,000	20,310,750
	100,000		—	7.00	4/7/2010
	250,000		—	8.50	3/16/2011
	300,000		—	18.00	7/22/2012
	166,669		83,333	27.50	6/8/2014
Richard H. Liem (4)	10,000		15,000	27.50	6/8/2014	15,000	451,350
Steven L. Scheinthal (5)	2,500		—	6.00	12/17/2008	20,000	601,800
	30,000		—	8.50	3/16/2011
	20,000	(2)	—	9.65	3/16/2011
	40,000		10,000	18.00	7/22/2012
	16,000		24,000	27.50	6/8/2014
Jeffrey L. Cantwell (6)	—		1,000	8.50	5/1/2012	4,285	128,936
	—		2,100	15.80	1/1/2014
	6,000		9,000	27.50	6/8/2014
Richard E. Ervin	N/A		N/A	N/A	N/A	N/A	N/A
K. Kelly Roberts (7)	2,000		8,000	15.80	1/1/2014	2,856	85,937

(1) The market value was determined using $30.09, the closing stock price of our common stock on the NYSE on December 29, 2006, the last day of trading in 2006.

(2) The exercise price for these options reflects repricing of the options to correspond to our closing stock price on the deemed grant date (the measurement date for accounting purposes), as determined during our internal review of our past option granting practices. See “Section 409A Compliance,” below.

(3) The vesting dates and amounts for unvested options and stock awards for Mr. Fertitta are: 83,333 options vest on 6/8/07 and his restricted shares vest as follow: 100,000 on 1/1/13, 100,000 on 1/1/14, 100,000 on 1/1/15 and 100,000 on 1/1/16 for a total of 400,000 shares and 275,000 shares of restricted stock vest on 1/1/13.

(4) The vesting dates and amounts for unvested options and stock awards for Mr. Liem are: 15,000 options which vest in equal yearly installments of 5,000 commencing on 6/8/07 and 15,000 shares of restricted stock vest in equal yearly installments of 3,000 commencing on 4/6/07.

(5) The vesting dates and amounts for unvested options and stock awards for Mr. Scheinthal are: 10,000 options vest on 7/22/07, 24,000 options which vest in equal yearly installments of 8,000 commencing on 6/8/07 and 20,000 shares of restricted stock vest in equal yearly installments of 4,000 commencing on 4/6/07.

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(6) The vesting dates and amounts for unvested options and stock awards for Mr. Cantwell are: 1,000 options vest on 5/1/07, 2,100 options which vest in equal yearly installments of 700 commencing on 1/1/07 and 4,285 shares of restricted stock which vest in equal yearly installments of 857 commencing on 4/6/07.

(7) The vesting dates and amounts for unvested options and stock awards for Mr. Roberts are: 8,000 options which vest in equal yearly installments of 1,000 commencing on 1/1/07 and 2,856 shares of restricted stock which vest in equal yearly installments of 571 commencing on 4/6/07.

Section 409A Compliance

Section 409A of the Internal Revenue Code imposes certain restrictions and additional taxes on the recipients of discounted options in the United States. Prior to December 31, 2006, the final date allowable under Section 409A, Mr. Scheinthal and Mr. Ervin, agreed to reprice upward unexercised discounted options that vested after December 31, 2004 to the closing price on what was believed to be the actual accounting measurement date for the option granted. The repricing did not affect the vesting schedules of the options, which continue to vest based on the original grant date. Where applicable in this Form 10-K, exercise prices will reflect the exercise price as amended.

OPTION EXERCISES AND STOCK VESTED

The following table contains information with respect to the options exercised by the executive officers named above during the fiscal year ended December 31, 2006.

	Option Awards		Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)(1)	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Tilman J. Fertitta	—	—	—	—
Richard H. Liem	—	—	—	—
Steven L. Scheinthal	29,000	721,230	—	—
Jeffery L. Cantwell	1,700	30,488	—	—
Richard E. Ervin (2)	97,500	3,372,100	—	—
K. Kelly Roberts	—	—	—	—

(1) Reflects the difference between the market value of the shares at the exercise date and the option exercise price multiplied by the number of shares acquired on exercise.

(2) Of these options, 15,000 were repriced upwards in December 2006 from $8.50 to $9.65, thereby reducing the “Value Realized on Exercise” by $17,250. In lieu of exercising vested options to purchase an additional 77,500 shares of common stock upon his departure from the Company, Mr. Ervin accepted payment from the Company of $1,095,625, which amount is reflected in the “All Other Compensation” column of the Summary Compensation Table.

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NON-QUALIFIED DEFERRED COMPENSATION

The following table contains information with respect to the non-qualified deferred compensation plan by the executive officers named above during the fiscal year ended December 31, 2006.

Name	Executive Contributions in 2006 ($)(1)	Registrant Contributions in 2006 ($)(2)	Aggregate Earnings in 2006 ($)(3)	Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at December 31, 2006 ($)(4)
Tilman J. Fertitta	10,000	3,000	5,225	—	44,977
Richard H Liem	50,000	12,000	19,977	—	179,719
Steven L. Scheinthal	40,000	12,000	22,656	—	180,402
Jeffrey L. Cantwell	32,596	9,055	16,052	—	149,615
Richard E. Ervin	30,000	—	3,727	—	33,727
K. Kelly Roberts	10,400	3,120	4,812	—	42,141

(1) Amounts in the “Executive Contributions in 2006” column were deferred in 2006 and, for all executives other than Mr. Cantwell, were reflected in the “Bonus” column of the 2005 Summary Compensation Table. These amounts were earned in 2005 but paid in 2006. Mr. Cantwell’s 2006 contribution was made from his 2006 base salary and therefore is reflected in the 2006 Summary Compensation Table.

(2) Amounts in the “Registrant Contributions in 2006” column are reflected in the “All Other Compensation” column of the 2006 Summary Compensation Table. These contributions were based on the executive contributions actually made in 2005.

(3) None of the earnings reported in this column is included in the Summary Compensation Table because they were not above market or preferential.

(4) The following amounts represent aggregate executive and Company contributions under the plan prior to 2006 and were previously reported as compensation to the named executive officers in the Summary Compensation Table for previous years: Mr. Fertitta, $36,000; Mr. Liem, $155,290; Mr. Scheinthal, $144,000; Mr. Cantwell, $123,456; and Mr. Ervin, $30,000. Mr. Roberts was not previously listed in the Summary Compensation Table. His total individual and company contributions prior to 2006 were $26,355.

The following describes the material features of our non-qualified deferred compensation plan in which the executive officers participate.

The deferred compensation plan went into effect in 2004. Executive contributions are made from base salary or bonus. Under the deferred compensation plan, a participant receives his prior deferrals and vested matching contributions, along with any accumulated earnings thereon, following his termination of employment, disability (as defined by the plan), death (in which case the designated beneficiary will receive the benefit), or upon a change of control. Participants may also receive unplanned in-service distributions in limited emergency situations. The Participant may elect to defer a minimum of $2,000 of base salary and/or bonus, and is subject to a maximum contribution of 90% of the participant’s base salary and 100% of the bonus.

We have hired Clark Consulting to help manage the deferred compensation plan. Clark Consulting has set up an investment vehicle, similar to our 401(k) plan offered to non-executives. The deferred compensation plan allows the participants to allocate and/or reallocate the balance in their account daily among available measurement funds. Therefore, the annual earnings will be dependant upon the portfolio selections made by each participant. During 2006, there was a selection of 14 measurement funds available with a combined average return of 13.95%. The best performing fund was AIM VI Real Estate: SI Fund with an annual return of 42.60%. The worst performing fund was the PIMC VIT Real Return: AC with an annual return of 0.57%. The Maxim Money Market had a return of 4.58%.

We have the discretion to make matching contributions to a participant’s account. In 2006, we matched either 25% or 30% of each participant’s 2006 contributions. The executive officers each received a 30% matching contribution in 2006 for 2005 deferrals. The matching contribution is subject to a five (5) year vesting

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schedule at a rate of 20% per year. Notwithstanding the vesting schedule, a participant will become fully vested upon reaching the age of 62.

The deferred compensation plan allows participants to elect the form in which the retirement benefit will be paid (lump-sum or installments). The participant has the opportunity to change the form of the retirement benefit payment subject to certain requirements.

We have adopted a “rabbi trust” to protect the assets of the deferred compensation plan.

EMPLOYMENT AGREEMENTS AND POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

Effective January 1, 2003, we entered into an employment agreement with Tilman Fertitta, our CEO, that sets forth the general terms and conditions of his employment for the term commencing January 1, 2003. The initial term of the contract expires at the end of 2007. The contract automatically extends for an additional period of five years unless either party provides written notice of its election not to extend.

Under the agreement, Mr. Fertitta agrees to serve as our President, CEO and Chairman of the Board for an annual base salary of not less than $1,250,000. The Compensation Committee is required to review Mr. Fertitta’s salary at least annually to determine if any salary increases are warranted. The agreement provides that Mr. Fertitta shall be entitled to participate in any cash bonus programs established by the Company and, in the absence of a cash bonus program, to receive an annual bonus as determined by the Compensation Committee and in the range of up to two times Mr. Fertitta’s base salary. The Agreement provides that,

• Mr. Fertitta is eligible to participate in the Company’s deferred compensation plans,

• Mr. Fertitta is entitled to an automobile and payment or reimbursement of all operating and maintenance costs,

• the Company will provide an annual expense and/or administrative or support/personnel allowance and will pay or reimburse Mr. Fertitta for annual financial service fees for tax preparation, estate planning and legal or financial advice,

• the Company will reimburse Mr. Fertitta for all reasonable business expenses, including travel, business entertainment and membership fees and dues for country clubs Mr. Fertitta deems necessary to carry out his duties under the employment agreement,

• the Company will provide Mr. Fertitta with the use of Company transportation and dockage fees,

• Mr. Fertitta is entitled to life insurance and other insurance benefits as approved by the Compensation Committee and provided to other executive officers of the corporation as well as payment or reimbursement of medical expenses or charges not otherwise paid for by Company-provided insurance,

• the Company shall provide for the security of Mr. Fertitta, and

• for each year of the agreement, the Company shall make charitable contributions to charities of Mr. Fertitta’s choice of at least $500,000 as well as match Mr. Fertitta’s charitable contributions in an amount not to exceed $250,000 per year.

In addition, the agreement grants to Mr. Fertitta the right to receive stock options and 500,000 shares of restricted stock, to be issued in the amount of 100,000 shares a year over the term of the agreement and which vests 10 years from the effective date of the grant. Beginning in 2006, the Company adopted a general policy to grant restricted stock in lieu of options due to the many variables in valuing option awards. In connection with this new policy, the Company amended the employment agreement effective March 14, 2006. Previously, the employment agreement provided that Mr. Fertitta was entitled to an aggregate of 800,000 stock options over the

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term of the agreement, of which 250,000 were issued in 2004. After the Committee determined it was in the Company’s best interest to issue restricted stock rather than options, the Committee, based on the recommendation of Pearl Meyer & Partners, issued 275,000 shares of restricted stock to the CEO in place of the remaining 550,000 options. The conversion factor was determined by the Compensation Committee based on a report by Pearl Meyer & Partners. The restricted stock will not vest until seven years from the date of the grant.

The Company does not have employment agreements with any of its other executive officers.

In the event Mr. Fertitta’s employment is terminated as a result of his death or disability (as defined in the employment agreement), he, or his legal representative, is entitled to receive all compensation he would otherwise have been entitled to receive throughout the remaining term of the employment period as well as other death or disability benefits we provide. In addition, any stock options or restricted stock immediately vest. In the event Mr. Fertitta’s employment is terminated (i) by him other than for good reason, or (ii) by us for cause, Mr. Fertitta will receive all accrued compensation and other amounts owed to him as of the date of termination. In the event Mr. Fertitta’s employment is terminated (i) by us other than for cause, (ii) by Mr. Fertitta for good reason or (iii) within one year of a change in control, all of Mr. Fertitta’s stock options and restricted stock immediately vest and Mr. Fertitta is entitled to receive, among other things, (a) a lump sum payment of $5,000,000 in consideration of his agreement not to compete with us, (b) an amount equal to three times 180% of his base salary, (c) an additional lump sum payment necessary to pay the life insurance policy and (d) a continuation of certain other benefits.

Potential Payments on Termination Following a Change in Control

As described above, our CEO is party to an employment agreement with us and each executive officer is a party to equity award agreements relating to options and restricted stock granted and various plans. These agreements and plans provide that an executive officer is entitled to additional consideration in the event of a termination event. The following sets forth the incremental compensation that would be payable by us to each of our executive officers in the event of the executive officer’s termination of employment with us under various scenarios, which we refer to as “termination events,” including the executive officer’s voluntary resignation, involuntary termination for cause, involuntary termination without cause, termination by the executive for good reason, termination in connection with a change in control, termination in the event of disability, termination in the event of death, and termination in the event of retirement. In accordance with applicable SEC rules, the following discussion assumes:

• that the termination event in question occurred on December 29, 2006, the last business day of 2006; and

• with respect to calculations based on our stock price, we used $30.09, which was the reported closing price of our common stock on December 29, 2006.

The analysis contained in this section does not consider or include payments made to an executive officer with respect to contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms or operation, in favor of our executive officers and that are available generally to all salaried employees. The actual amounts that would be paid upon an executive officer’s termination of employment can only be determined at the time of such executive officer’s termination. Due to the number of factors that affect the nature and amount of any compensation or benefits provided upon the termination event, any actual amounts paid or distributed may be higher or lower than reported below. Factors that could affect these amounts include the timing during the year of any such event, our stock price at such time and the executive officer’s age and service.

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Tilman J. Fertitta. In addition to the amounts listed below, Mr. Fertitta is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.

Element	Involuntary Termination without Cause or for Good Reason ($)		Termination Following a Change in Control ($)		Termination in the Event of Disability ($)	Termination in the Event of Death ($)
Cash	7,390,365	(1)	7,390,365	(1)	1,928,073	1,928,073
Severance Payment (2)	7,830,000		7,830,000		—	—
Health & Security	See (3)		See (3)		See (3)	—
Stock Option Awards (4)	215,832		215,832		215,832	215,832
Restricted Stock Awards (5)	20,310,750		20,310,750		20,310,750	20,310,750
280G Excise Gross-Up (6)	20,772,286		20,772,286		12,042,431	12,042,431
Total	56,519,233		56,519,233		34,497,086	34,497,086

(1) In the case of a termination without cause, for good reason or following a change of control, includes a lump sum payment in the amount of $5,000,000 in exchange for Mr. Fertitta’s agreement not to compete or solicit employees. The balance of the cash proceeds represents payments on Mr. Fertitta’s life insurance policy, the value of administrative support services and financial service fees, for tax preparation, estate planning and legal or financial advice to which Mr. Fertitta is entitled under his employment agreement, use of Company transportation and dockage fees, and membership fees and dues for country clubs, all of which Mr. Fertitta is entitled to for a period of five years following the termination event.

(2) Under Mr. Fertitta’s employment agreement, he is entitled to a severance payment equal to three times 180% of his base salary at the rate in effect immediately prior to the termination event.

(3) Under Mr. Fertitta’s employment agreement, in the case of a termination without cause, for good reason or following a change of control, the Company is obligated to maintain group life insurance, accidental death and dismemberment insurance, hospitalization, surgical, and other insurance coverage in effect immediately prior to the termination event as well as supplemental medical reimbursement until the later of Mr. Fertitta’s death, his wife’s death or until all of his children reach the age of 25 or complete college. In addition, the Company is required to maintain personal security for Mr. Fertitta. In the case of a termination in the event of disability or death, Mr. Fertitta is entitled to benefits at least equal to the most favorable benefits provided by the Company to the estates and beneficiaries of other executive level employees of the Company under plans, programs, practices and policies relating to death or disability benefits. In 2006, the approximate cost of the Company provided health insurance and medical expense reimbursement to Mr. Fertitta was $26,260. The cost to us for security services to Mr. Fertitta in 2006 was $246,912.

(4) Represents immediate vesting of all stock options. The closing price of the Company’s common stock on the New York Stock Exchange on December 29, 2006, was $30.09 per share.

(5) Represents immediate vesting of all restricted stock awards as well as granting of restricted stock required to be granted under the employment agreement during the term of the employment agreement but not yet granted. The closing price of the Company’s common stock on the New York Stock Exchange on December 29, 2006, was $30.09 per share.

(6) In the case of a termination without cause, for good reason or following a change of control, represents excise tax gross-up under Section 280G and 4999 of the Internal Revenue Code for all amounts payable to Mr. Fertitta in connection with a termination. In the case of a termination in the event of disability or death, represents excise tax gross-up for amounts payable in connection with the vesting of stock options and restricted stock.

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Richard H. Liem. Mr. Liem does not have an employment agreement. Therefore, he is not entitled to any compensation payable or benefits upon a termination event except as provided in his equity award agreements.

Element	Termination in Connection with Change in Control ($)	Termination in the Event of Disability ($)	Termination in the Event of Death ($)
Stock Option Awards	38,850	38,850	38,850
Restricted Stock Awards	451,350	451,350	451,350
Total	490,200	490,200	490,200

Steven L. Scheinthal. Mr. Scheinthal does not have an employment agreement. Therefore, he is not entitled to any compensation payable or benefits upon a termination event except as provided in his equity award agreements.

Element	Termination in Connection with Change in Control ($)	Termination in the Event of Disability ($)	Termination in the Event of Death ($)
Stock Option Awards	183,060	183,060	183,060
Restricted Stock Awards	601,800	601,800	601,800
Total	784,860	784,860	784,860

Jeffery L. Cantwell. Mr. Cantwell does not have an employment agreement. Therefore, he is not entitled to any compensation payable or benefits upon a termination event except as provided in his equity award agreements.

Element	Termination in Connection with Change in Control ($)	Termination in the Event of Disability ($)	Termination in the Event of Death ($)
Stock Option Awards	74,909	74,909	74,909
Restricted Stock Awards	128,936	128,936	128,936
Total	203,845	203,845	203,845

K. Kelly Roberts. Mr. Roberts does not have an employment agreement. Therefore, he is not entitled to any compensation payable or benefits upon a termination event except as provided in his equity award agreements.

Element	Termination in Connection with Change in Control ($)	Termination in the Event of Disability ($)	Termination in the Event of Death ($)
Stock Option Awards	114,320	114,320	114,320
Restricted Stock Awards	85,937	85,937	85,937
Total	200,257	200,257	200,257

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COMPENSATION OF DIRECTORS

Our Directors who are not executive officers received Director’s fees of $36,000 for 2006, plus the expenses incurred by them on our behalf. Non-employee directors also receive $1,000 for each Audit, Compensation and Nominating and Corporate Governance Committee meeting attended, as well as other committee meetings they attend. In addition, Mr. Taylor received $60,000 for consulting and governmental support services, which amount is reflected in the All Other Compensation column. Historically, each non-employee director has received stock options to acquire shares of common stock. In the past, a non-employee director would receive an option to purchase 10,000 of shares of common stock upon their initial election to the Board and 2,000 shares each time such person was re-elected for an additional term as director. No options were awarded to any of the non-employee directors upon their re-election in 2005. The Board of Directors obtained shareholder approval in 2006 to provide for the issuance of shares of restricted stock upon a non-employee director’s election to the Board or subsequent re-election in lieu of stock options. In 2006, each non-employee director received 2,000 shares of restricted stock with a two year vesting schedule. While normally a non-employee director will receive 1,000 shares of restricted stock upon their election or re-election to the Board, the Board made the decision to issue an additional 1,000 shares to each non-employee director in 2006 due to the fact that no equity compensation was issued to any non-employee director re-elected to the Board in 2005. All Other Compensation reflects dividend compensation paid on the stock awards. None of the directors have any perquisites over $10,000.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)(1)	Option Awards ($)(6)	All Other Compensation ($)	Total ($)
Michael S. Chadwick(2)	43,000	62,440	—	200	105,640
Michael Richmond(3)	44,000	62,440	3,248	200	109,888
Joe Max Taylor(4)	40,000	62,440	—	60,200	162,640
Kenneth Brimmer(5)	43,000	62,440	—	200	105,640

(1) Amounts shown reflect the accounting expense recognized by the Company for financial statement reporting purposes in accordance with the provisions of Statement of Financial Accounting Standards No. 123R, “Share-Based Payments” and do not reflect whether the named executive officer has actually realized a financial benefit from the award.

(2) At December 31, 2006, Mr. Chadwick had 16,000 options of which 13,600 were exercisable and 2,000 shares of restricted stock which vest 50% on 6/1/07 and 50% on 6/1/08. The grant date fair value of restricted stock awarded to Mr. Chadwick in 2006 was $62,440, calculated by multiplying the number of shares granted in 2006 by the fair value in accordance with SFAS 123R.

(3) At December 31, 2006, Mr. Richmond had 12,000 options of which 6,800 were exercisable and 2,000 shares of restricted stock which vest 50% on 6/1/07 and 50% on 6/1/08. The grant date fair value of restricted stock awarded to Mr. Richmond in 2006 was $62,440, calculated by multiplying the number of shares granted in 2006 by the fair value in accordance with SFAS 123R.

(4) At December 31, 2006, Mr. Taylor had 3,200 options of which 800 were exercisable and 2,000 shares of restricted stock which vest 50% on 6/1/07 and 50% on 6/1/08. The grant date fair value of restricted stock awarded to Mr. Taylor in 2006 was $62,440, calculated by multiplying the number of shares granted in 2006 by the fair value in accordance with SFAS 123R.

(5) At December 31, 2006, Mr. Brimmer had 10,000 options of which 4,000 were exercisable and 2,000 shares of restricted stock which vest 50% on 6/1/07 and 50% on 6/1/08. The grant date fair value of restricted stock awarded to Mr. Brimmer in 2006 was $62,440, calculated by multiplying the number of shares granted in 2006 by the fair value in accordance with SFAS 123R.

(6) The amount listed in the Option Awards Table was expensed by the Company in 2006 for the named director in connection with the Company’s stock option review. No options were awarded to this director in 2006.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Taylor, Chadwick and Richmond served as members of the Compensation Committee during 2006. No member of the Compensation Committee is or has been an officer or employee of ours or any of our subsidiaries. The members of the Compensation Committee had no other relationships with us requiring disclosure pursuant to Item 404 of SEC Regulation S-K. No executive officer of ours served as a member of the Compensation Committee (or other Board committee performing similar functions or, in the absence of any such committee, the entire Board of Directors) of another corporation whose executive officer served on the Compensation Committee. None of our executive officers served as a director of another corporation whose executive officers served on the Compensation Committee. None of our executive officers served as a member of the Compensation Committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire Board of Directors) of another corporation whose executive officers served as one of our directors.

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ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT

The following table sets forth, as of July 31, 2007, certain information regarding the beneficial ownership of our common stock by (a) each person we know to own beneficially more than five percent of the outstanding shares of our common stock, (b) each of our directors, (c) each executive officer named in the Summary Compensation Table above, and (d) all of our executive officers and directors as a group. Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned. The address of each of Messrs. Fertitta, Scheinthal, Liem, Chadwick, Taylor, Richmond, Brimmer, Cantwell and Roberts is 1510 West Loop South, Houston, Texas 77027.

Name of Beneficial Owner	Shares Beneficially Owned
	Number	Percent
Executive Officers and Directors
Tilman J. Fertitta (1)	6,631,481	32.7	%
Richard H. Liem (2)(3)	53,143	*
Steven L. Scheinthal (2)(3)	187,300	*
Jeffrey L. Cantwell (2)(3)	15,195	*
Kenneth Brimmer (2)(4)	8,713	*
Michael S. Chadwick (2)(4)	16,800	*
Michael Richmond (2)(4)	9,200	*
Joe Max Taylor (2)(4)	4,000	*
K. Kelly Roberts (2)(3)	10,856	*
5% owners
Dimensional Fund Advisors Inc. (5)	2,009,140	10.4	%
Deutsche Bank AG (6)	2,092,109	10.8	%
All executive officers and directors as a group (9 persons) (7)	6,936,688	34	%

* Less than 1%.

(1) Includes 900,000 shares subject to options owned by Mr. Fertitta that are immediately exercisable or will become exercisable within 60 days and 775,000 shares of restricted stock, 500,000 shares of which vest ten years from the effective date of grant and 275,000 shares of which vest seven years from the effective date of grant.

(2) Includes 15,000; 76,500; 10,700; 6,000; 14,800; 7,200, 2,000 and 3,000 shares subject to options, respectively, for the persons named in the above table, which are exercisable within 60 days.

(3) Includes restricted stock issued on April 6, 2006 which vests 20% a year over five years from the effective date of grant – 20,000 shares for Mr. Scheinthal, 15,000 shares for Mr. Liem, 4,285 shares for Mr. Cantwell and 2,856 shares for Mr. Roberts.

(4) Includes restricted stock issued on June 1, 2006 which vests 50% a year over two years from the effective date of grant – 2,000 shares each for Messrs. Chadwick, Taylor, Richmond and Brimmer.

(5) The address of Dimensional Fund Advisors Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. The information set forth herein has been compiled from filings made with the SEC on Schedule 13G filed on February 9, 2007.

(6) The address of Deutsche Bank AG is 60 Wall Street, New York, NY 10005. The information set forth herein has been compiled from filings made with the SEC on Schedule 13G filed on February 1, 2007.

(7) Includes 1,035,200 shares subject to options for all officers and directors as a group which are, or will become exercisable within 60 days of the date hereof, and 825,141 shares of restricted stock, 500,000 shares of which vest ten years from the effective date of grant, 275,000 shares of which vest seven years from the effective date of grant, 42,141 shares of which vest 20% a year over five years from the effective date of grant, and 8,000 shares of which vest 50% a year over two years from the effective date of grant.

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Equity Compensation Plan Information

The following table provides information as of December 31, 2006 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)	194,105	$	9.84	800,000
Equity compensation plans not approved by the stockholders (2)	1,347,850	$	17.87	315,080
Total	1,541,955	$	16.86	1,115,080

(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 maintained two stock option plans, which were originally adopted in 1993, (the Stock Option Plans), as amended, pursuant to which options were 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 were administered by the Compensation Committee of the Board of Directors (the Committee), which determined at its’ discretion, the number of shares subject to each option granted and the related purchase price, vesting and option periods. Options are no longer issued under either plan, however, options previously issued under the stock option plans are still outstanding.

(c) The Company also maintained 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 received 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 issued under the Flex Plan (or with respect to which awards may be granted) were not in excess of 2,000,000 shares. Options are no longer issued under the Flex Plan, however, options previously issued are still outstanding.

(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,

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such as a change in control or, in the case of options granted to our CEO, if our stock hits certain price targets. The options issued to our CEO are all vested.

(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 $8.50 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. In December 2006, certain options to a member of senior management were increased to an exercise price of $9.62. The options issued to our CFO are all vested.

(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 $8.50 and $15.80, respectively, 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) In addition, we have issued pursuant to an employment agreement, over its five year term, 775,000 shares of restricted stock, 500,000 shares which vest 10 years from the grant date, and 275,000 shares which vest 7 years from the grant date. In addition, 250,000 stock options have also been granted pursuant to the employment agreement.

(g) In April 2006, 102,000 restricted common shares were issued to key employees vesting ratably over five years and 8,000 restricted common shares were granted to non-employee directors vesting ratably over two years. 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.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our policy is, to the extent practicable, to avoid transactions (except those which are employment related) with officers, directors, and affiliates. In any event, any such transactions will be entered into on terms which we believe are no less favorable to us than could be obtained from third parties, and such transactions will be approved by a majority of our disinterested directors.

In 2003, we entered into a Management Agreement (the “Agreement”) with Fertitta Hospitality, L.L.C. (“Fertitta Hospitality”), which is jointly owned by our President and CEO and his wife. Pursuant to the Agreement, we provide services to Fertitta Hospitality with respect to management and operational matters, administrative, personnel and transportation matters and receives a fee of $7,500 a month, plus reimbursement of expenses. The Management Agreement provides for a renewable three year term. The terms of the Management Agreement were approved by the Non-Employee Directors, who received an opinion of an independent consultant that the economic and non-economic terms of the Management Agreement were a fair-market transaction.

In 1999, we entered into a ground lease agreement with 610 Loop Venture, LLC, a company wholly-owned by our President and CEO, on land adjacent to our corporate headquarters. The ground lease was for a term of five years with one option renewal period. Under the terms of the ground lease, 610 Loop Venture pays us 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 an appraised or predetermined value. In 2004, the ground lease agreement was extended for another five (5) years.

In 2002, in connection with the construction of a Rainforest Cafe restaurant on a prime tract of waterfront property in Galveston, Texas, we entered into a 20-year, with option renewals, ground lease agreement with

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Fertitta Hospitality having a base rent of $96,000 per year. Pursuant to the terms of the lease, the annual rent is equal to the greater of the base rent or sliding scale percentage rent from four to six percent of revenues, plus real property taxes and insurance. The terms of the lease were approved by the Non-Employee Directors, who received the opinion of an independent real estate firm that the economic and non-economic terms of the lease were a fair-market transaction. In 2006, we paid total base and percentage rent in the amount of $567,000.

As permitted by the employment contract between us and our CEO, we made a charitable contribution in the amount of $91,000 to a charitable foundation that our CEO served on as trustee in 2006.

On a routine basis we hold or host promotional events, training seminars and conferences for our personnel. In connection therewith, in 2006, we incurred expenses in the amount of $50,000 at resort hotel properties owned by our CEO and to which we provide management services. The amount that we paid is below the amount that would have been paid by an unaffiliated third party.

We jointly sponsor events and promotional activities with Fertitta Hospitality which result in shared costs and use of our personnel or Fertitta Hospitality employees and assets.

The above agreements were entered into between related parties and were not the result of arm’s-length negotiations. Accordingly, the terms of each transaction may have been more or less favorable to us than might have been obtained from unaffiliated third parties. We believe that the terms of each transaction were at least as favorable to us as that which could have been obtained in arm’s-length transactions with an unaffiliated party.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

REPORT OF THE AUDIT COMMITTEE

FOR THE YEAR ENDED DECEMBER 31, 2006

The Audit Committee is composed of three Non-Employee Directors and acts under a written charter adopted by the Board of Directors. The Audit Committee has the sole responsibility for the appointment and retention of the Company’s independent auditors and the approval of all audit and engagement fees. The Audit Committee meets periodically with management, the internal auditors and the independent auditors regarding accounting policies and procedures, audit results and internal accounting controls. The internal auditors and the independent auditors have free access to the Audit Committee, without management’s presence to discuss the scope and results of their audit work. The Company’s management is primarily responsible for the Company’s financial statements and the quality and integrity of the reporting process, including establishing and maintaining the systems of internal controls over financial reporting and assessing the effectiveness of those controls. The independent auditors, Grant Thornton LLP (“GT”), are responsible for auditing those financial statements and internal controls over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for expressing an opinion on the conformity of the financial statements with accounting principles generally accepted in the United States as well as reporting on the effectiveness of the Company’s internal controls over financial reporting. On behalf of the Board of Directors, the Audit Committee monitors the Company’s financial reporting processes and systems of internal control, the independence and the performance of the independent accountants, and the performance of the internal auditors.

Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent accountants. The Audit Committee has discussed with the independent accountants their evaluation of the accounting principles, practices and judgments applied by management, and the Audit Committee has discussed any items required to be communicated to it by the independent accountants in accordance with standards established by the American Institute of Certified Public Accountants.

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In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements for the year ended December 31, 2006, and matters related to Section 404 of the Sarbanes-Oxley Act of 2002 with the Company’s management and representatives of GT. The Audit Committee discussed with GT the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. In addition, the Audit Committee discussed with GT their independence from the Company and its management, including the matters in the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and has received from GT the written disclosure required by Standard No. 1.

Based on the reviews and discussions described above, the Audit Committee has recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Audit Committee

Michael S. Chadwick, Chairman

Michael Richmond

Kenneth Brimmer

The Audit Committee has again retained GT as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007. A representative of GT will be present at the annual meeting. The representative will be given an opportunity to make a statement, if he or she desires to do so, and to respond to appropriate questions.

Audit Fees

During the year ended December 31, 2006, the aggregate fees billed by GT for the audit of the Company’s financial statements for such year and for the reviews of the Company’s interim financial statements were $1,619,215.

The aggregate fees billed by GT for the audit of the Company’s financial statements for 2005 and for the reviews of the Company’s interim financial statements were $841,815.

Audit-Related Fees

The Company did not pay any Audit-Related Fees for the fiscal year ended December 31, 2006 or 2005 to GT.

Tax Fees

The Company did not pay any fees for professional services rendered by GT for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2006 or 2005.

All Other Fees

The aggregate fees billed for services rendered by GT not reportable as Audit Fees, Audit-Related Fees or Tax Fees for the fiscal year, ended December 31, 2006 and December 31, 2005 were $0.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee annually reviews and pre-approves the audit, review, attest and permitted non-audit services to be provided during the next audit cycle by the independent registered public accounting firm. To the extent practicable, at the same meeting the Audit Committee also reviews and approves a budget for each of such

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services. Services proposed to be provided by the independent registered public accounting firm that have not been pre-approved during the annual review and the fees for such proposed services must be pre-approved by the Audit Committee. Additionally, fees for previously approved services that are expected to exceed the previously approved budget must also be approved by the Audit Committee.

All requests or applications for the independent registered public accounting firm to provide services to the Company must be submitted to the Audit Committee by the independent registered public accounting firm and management and state as to whether, in their view, the request or application is consistent with applicable laws, rules and regulations relating to independent registered public accounting firm independence. In the event that any member of management or the independent registered public accounting firm becomes aware that any services are being, or have been, provided by the independent registered public accounting firm to the Company without the requisite pre-approval, such individual must immediately notify the Chief Financial Officer, who must promptly notify the Chairman of the Audit Committee and appropriate management so that prompt action may be taken to the extent deemed necessary or advisable.

All of the services provided by the Company’s independent registered public accounting firm during 2005 and 2006 were pre-approved by the Audit Committee.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1. Financial Statements

The following financial statements are set forth herein commencing on page 70:

—Report of Independent Registered Public Accounting Firm Grant Thornton LLP

—Consolidated Balance Sheets as of December 31, 2006 and 2005

—Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004

—Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2006, 2005 and 2004

—Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004.

—Notes to Consolidated Financial Statements

2. Financial Statement Schedules—Not applicable.

(b) Exhibits

Exhibit No.	Exhibit
2.1	Stock Purchase Agreement dated February 3, 2005 between Landry’s Restaurants, Inc. and Poster Financial Group, Inc. regarding the acquisition of Golden Nugget Casino (incorporated by reference to Exhibit 2.1 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
3.1	Certificate of Incorporation of Landry’s Seafood Restaurants, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
3.2	Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
3.3	Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.3 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
3.4	Bylaws of Landry’s Restaurants, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
3.5	Amendment to Bylaws (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2004, File No. 001-15531).
10.1	1993 Stock Option Plan (“Plan”) (incorporated by reference to Exhibit 10.60 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.2	Form of Incentive Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.61 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.3	Form of Non-Qualified Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.62 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).

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Exhibit No.	Exhibit
10.4	Non-Qualified Formula Stock Option Plan for Non-Employee Directors (“Directors’ Plan”) (incorporated by reference to Exhibit 10.63 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.5	First Amendment to Non-Qualified Formula Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit C of the Company’s Proxy Statement, filed on May 8, 1995, File No. 000-22150).
10.6	Form of Stock Option Agreement for Directors’ Plan (incorporated by reference to Exhibit 10.64 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.7	1995 Flexible Incentive Plan (incorporated by reference to Exhibit B of the Company’s Proxy Statement, filed May 8, 1995, File No. 000-22150).
10.8	2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 of the Company’s Form 10-K for the year ended December 31, 2003, filed March 9, 2004, File No. 001-15531).
10.9	Form of Stock Option Agreement between Landry’s Seafood Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.11 of the Company’s Form 10-K for the year ended December 31, 1995, File No. 000-22150).
10.10	Purchase Agreement dated December 15, 2004 between the Company and the initial purchasers (incorporated by reference to Exhibit 10.10 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.11	Indenture Agreement dated as of December 28, 2004 by and among the Company, the Guarantors and Wachovia Securities, National Association (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.12	Registration Rights Agreement date as of December 28, 2004 by and among the Company, the Guarantors and the initial purchasers party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.13	Credit Agreement dated as of December 28, 2004 by and among the Company, Wachovia Bank, National Association, and the other financial institutions party thereto (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.14	Security Agreement dated as of December 28, 2004 by and among the Company, the additional grantors named therein and Wachovia Bank, National Association (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.15	Guaranty Agreement dated as of December 28, 2004 between the Company and the Guarantors (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.16	Employment Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2003, filed August 12, 2003, File No. 001-15531).
10.17	Landry’s Restaurants, Inc. 2002 Employee/Rainforest Conversion Plan (incorporated by reference to Exhibit 99.1 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.18	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.2 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).

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Exhibit No.	Exhibit
10.19	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.3 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.20	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.5 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.21	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.6 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.22	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.7 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.23	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.9 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.24	Form of Management Agreement between Landry’s Management, L.P. and Fertitta Hospitality (incorporated by reference to Exhibit 10.34 of the Company’s Form 10-K for the year ended December 31, 2003, File No. 001-15531).
10.25	Ground Lease between Landry’s Management, L.P. and 610 Loop Venture, L.L.C. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 1999, File No. 000-22150).
10.26	Amendment to Ground Lease between Landry’s Management, L.P. and 610 Loop Venture, L.L.C. (incorporated by reference to Exhibit 10.26 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.27	Second Amendment to Contract of Sale and Development Agreement between Landry’s Management, L.P. and 610 Loop Venture, LLC (incorporated by reference to Exhibit 10.27 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.28	Form of Landry’s Restaurants, Inc. Nonqualified Stock Option Agreement for use in Landry’s Restaurants, Inc. 2001 Individual Stock Option Agreements (incorporated by reference to Exhibit 99.10 of the Company’s Form S-8, filed on March 31, 2003, File No. 333-104175).
10.29	Lease Agreement dated December 1, 2001 between Rainforest Cafe, Inc. and Fertitta Hospitality, LLC (incorporated by reference to Exhibit 10.29 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.30	Form of Restricted Stock Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.31	First Amendment to Personal Service and Employment Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit of the Company’s 10-K for the year ended December 31, 2005)
10.32	Restricted Stock Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit of the Company’s 10-K for the year ended December 31, 2005)
*10.33	T-Rex Cafe, Inc. Stockholders Agreement
*10.34	Stock Purchase Agreement By and Among JCS Holdings, LLC, LSRI Holdings, Inc and Landry’s Restaurants, Inc.
*12.1	Ratio of Earnings to Fixed Charges
14	Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s Form 10-K for the year ended December 31, 2003)

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Exhibit No.	Exhibit
*21	Subsidiaries of Landry’s Restaurants, Inc.
*23.1	Consent of Grant Thornton LLP
*31.1	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)
*31.2	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)
*32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13(a)-14(b)

* Filed herewith

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Landry’s Restaurants, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, appearing under Item 9A, that Landry’s Restaurants, Inc. and subsidiaries did not maintain effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Landry’s Restaurants, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment. A material weakness was identified with respect to deficiencies related to the documentation, authorization, accounting and related processes for stock option grants and adjustments in the financial reporting close process. Absent control improvements including oversight, a material misstatement could occur in the annual or interim financial statements. While the Company has identified additional control improvements, the Company was not able to evaluate whether such controls were operating effectively at December 31, 2006. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2006 financial statements, and this report does not affect our report dated on such consolidated financial statements and financial statement schedules.

In our opinion, management’s assessment that Landry’s Restaurants, Inc. and subsidiaries did not maintain effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material

70

respects, based on criteria established in Internal Control—Integrated Framework (COSO). Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Landry’s Restaurants, Inc. and subsidiaries have not maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Landry’s Restaurants, Inc. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 and our report dated August 9, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/    Grant Thornton LLP

Houston, Texas

August 9, 2007

71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Landry’s Restaurants, Inc.

We have audited the accompanying consolidated balance sheets of Landry’s Restaurants, Inc. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. 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 the standards of the Public Company Accounting Oversight Board (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 consolidated 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, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 9 to the consolidated financial statements, effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payments”.

As discussed in Note 2 to the consolidated balance sheet and statement of stockholders’ equity as of December 31, 2005 have been restated for adjustments related to stock options.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Landry’s Restaurants, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated August 9, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of internal control over financial reporting and an adverse opinion on the effectiveness of internal control over financial reporting.

/s/    Grant Thornton LLP

Houston, TX

August 9, 2007

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LANDRY’S RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2006		2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	31,268,942	$	38,874,912
Accounts receivable—trade and other, net		26,572,331		20,719,053
Inventories		40,444,848		55,796,002
Deferred taxes		17,044,462		12,763,948
Assets related to discontinued operations		10,677,863		284,505,625
Other current assets		21,646,560		11,954,293
Total current assets		147,655,006		424,613,833
PROPERTY AND EQUIPMENT, net		1,215,626,438		1,103,530,476
GOODWILL		18,527,547		18,527,547
OTHER INTANGIBLE ASSETS, net		39,264,330		31,033,901
OTHER ASSETS, net		43,838,630		34,873,056
Total assets	$	1,464,911,951	$	1,612,578,813
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	77,358,647	$	83,061,619
Accrued liabilities		133,562,776		113,371,477
Income taxes payable		759,891		5,060,885
Current portion of long-term notes and other obligations		748,122		1,851,741
Liabilities related to discontinued operations		2,409,502		23,296,283
Total current liabilities		214,838,938		226,642,005
LONG-TERM NOTES, NET OF CURRENT PORTION		710,456,197		816,043,799
DEFERRED TAXES		—		21,635,903
OTHER LIABILITIES		44,909,353		31,486,645
Total liabilities		970,204,488		1,095,808,352
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value, 60,000,000 shares authorized, 22,132,795 and 21,593,823, shares issued and outstanding, respectively		221,328		215,938
Additional paid-in capital, 2005 restated		331,320,290		327,260,457
Retained earnings, 2005 restated		163,165,845		189,294,066
Total stockholders’ equity		494,707,463		516,770,461
Total liabilities and stockholders’ equity	$	1,464,911,951	$	1,612,578,813

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

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LANDRY’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2006			2005			2004
REVENUES	$	1,134,301,147		$	897,459,513		$	804,903,052
OPERATING COSTS AND EXPENSES:
Cost of revenues		258,994,539			233,590,929			225,438,669
Labor		369,755,496			269,824,500			232,327,340
Other operating expenses		288,178,124			223,589,627			199,660,582
General and administrative expense		57,977,361			47,442,596			48,445,610
Depreciation and amortization		57,465,119			44,760,700			38,959,037
Asset impairment expense		8,636,276			—			1,708,654
Pre-opening expenses		6,230,465			3,030,611			3,234,018
Total operating costs and expenses		1,047,237,380			822,238,963			749,773,910
OPERATING INCOME		87,063,767			75,220,550			55,129,142
OTHER EXPENSE (INCOME):
Interest expense, net		49,215,393			31,207,629			10,845,576
Other, net		(2,421,901	)		(218,397	)		13,176,474
Total other expense		46,793,492			30,989,232			24,022,050
Income from continuing operations before income taxes		40,270,275			44,231,318			31,107,092
Provision (benefit) for income taxes		10,750,064			13,888,205			(9,549,481	)
Income from continuing operations		29,520,211			30,343,113			40,656,573
Income (loss) from discontinued operations, net of taxes		(51,289,934	)		14,471,923			25,865,155
Net income (loss)	$	(21,769,723	)	$	44,815,036		$	66,521,728
EARNINGS (LOSS) PER SHARE INFORMATION:
BASIC
Income from continuing operations	$	1.39		$	1.36		$	1.50
Income (loss) from discontinued operations		(2.41	)		0.65			0.96
Net income (loss)	$	(1.02	)	$	2.01		$	2.46
Weighted average number of common shares outstanding		21,300,000			22,300,000			27,000,000
DILUTED
Income from continuing operations	$	1.34		$	1.32		$	1.46
Income (loss) from discontinued operations		(2.33	)		0.63			0.93
Net income (loss)	$	(0.99	)	$	1.95		$	2.39
Weighted average number of common and common share equivalents outstanding		22,000,000			23,000,000			27,800,000

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

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LANDRY’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock					Additional Paid-In Capital			Retained Earnings			Total
	Shares		Amount
BALANCE, December 31, 2003	27,653,852		$	276,539		$	437,747,316		$	161,870,058		$	599,893,913
Restatement to reflect additional stock compensation expense	—			—			9,082,228			(9,082,228	)		—
BALANCE, December 31, 2003 as restated	27,653,852			276,539			446,829,544			152,787,830			599,893,913
Net income	—			—			—			66,521,728			66,521,728
Dividends paid	—			—			—			(4,783,404	)		(4,783,404	)
Purchase of common stock held for treasury	(2,291,800	)		(22,918	)		(42,843,341	)		(19,914,558	)		(62,780,817	)
Exercise of stock options	145,521			1,455			1,348,316			—			1,349,771
Tax benefit on stock option exercises	—			—			263,695			—			263,695
Issuance of restricted stock	100,000			1,000			(1,000	)		—			—
Amortization of deferred compensation	—			—			432,080			—			432,080
BALANCE, December 31, 2004 as restated	25,607,573			256,076			406,029,294			194,611,596			600,896,966
Net income	—			—			—			44,815,036			44,815,036
Dividends paid	—			—			—			(4,611,364	)		(4,611,364	)
Purchase of common stock held for treasury	(4,823,986	)		(48,240	)		(88,209,338	)		(45,521,202	)		(133,778,780	)
Exercise of stock options	710,236			7,102			8,571,588			—			8,578,690
Tax benefit on stock option exercises	—			—			180,420			—			180,420
Issuance of restricted stock	100,000			1,000			(1,000	)		—			—
Amortization of deferred compensation	—			—			689,493			—			689,493
BALANCE, December 31, 2005 as restated	21,593,823			215,938			327,260,457			189,294,066			516,770,461
Net income (loss)	—			—			—			(21,769,723	)		(21,769,723	)
Dividends paid	—			—			—			(4,358,498	)		(4,358,498	)
Purchase of common stock held for treasury	(210,733	)		(2,107	)		(6,017,531	)		—			(6,019,638	)
Exercise of stock options	264,785			2,648			2,737,117			—			2,739,765
Tax benefit on stock option exercises	—			—			64,808			—			64,808
Stock based compensation expense and income tax benefit	—			—			7,280,288			—			7,280,288
Issuance of restricted stock	484,920			4,849			(4,849	)		—			—
BALANCE, December 31, 2006	22,132,795		$	221,328		$	331,320,290		$	163,165,845		$	494,707,463

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

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LANDRY’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(21,769,723	)	$	44,815,036		$	66,521,728
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		73,263,258			63,492,747			57,294,123
Asset impairment expense		80,077,544			—			1,708,654
Deferred tax provision (benefit)		(29,322,911	)		9,698,299			(3,937,176	)
Deferred rent and other charges (income), net		(709,537	)		(161,202	)		2,719,471
Stock-based compensation expense		7,609,674			689,493			432,080
Financing prepayment expenses		—			—			16,649,009
Changes in assets and liabilities, net of acquisitions:
(Increase) decrease in trade and other receivables		(5,014,349	)		2,136,302			5,834,208
(Increase) decrease in inventories		11,078,135			(1,862,207	)		(7,231,855	)
(Increase) decrease in other assets		(333,641	)		434,688			(4,377,660	)
Increase (decrease) in accounts payable and accrued liabilities		10,754,012			31,812,862			(23,999,700	)
Total adjustments		147,402,185			106,240,982			45,091,154
Net cash provided by operating activities		125,632,462			151,056,018			111,612,882
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and other		(205,556,304	)		(118,487,055	)		(110,670,371	)
Proceeds from disposition of property and equipment		189,911,436			4,049,764			6,095,733
Business acquisitions, net of cash acquired		(7,860,857	)		(135,487,498	)		(12,930,565	)
Net cash used in investing activities		(23,505,725	)		(249,924,789	)		(117,505,203	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock for treasury		(2,812,893	)		(125,651,865	)		(62,780,817	)
Proceeds from exercise of stock options		2,739,766			451,775			1,349,771
Proceeds from debt issuance		—			—			575,495,000
Payments of debt and related expenses, net		(111,214,326	)		(19,010,143	)		(215,205,516	)
Proceeds from credit facility		432,649,258			125,000,000			185,000,000
Payments on credit facility		(427,076,664	)		(39,488,102	)		(307,000,000	)
Dividends paid		(4,358,498	)		(4,611,364	)		(4,783,404	)
Net cash (used in) provided by financing activities		(110,073,357	)		(63,309,699	)		172,075,034
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(7,946,620	)		(162,178,470	)		166,182,713
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (1)		39,215,562			201,394,032			35,211,319
CASH AND CASH EQUIVALENTS AT END OF YEAR (1)	$	31,268,942		$	39,215,562		$	201,394,032
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	61,866,319		$	45,297,362		$	15,988,418
Income taxes	$	11,381,720		$	4,838,396		$	9,949,203

(1) Includes cash and cash equivalents related to discontinued operations

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

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LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

We are a national, diversified restaurant, hospitality and entertainment company principally engaged in the ownership and operation of full service, casual dining restaurants, primarily under the names Landry’s Seafood House, The Crab House, Charley’s Crab, The Chart House and Saltgrass Steak House. In addition, we own and operate domestic and license international rainforest themed restaurants under the trade name Rainforest Cafe.

On September 27, 2005, Landry’s Gaming Inc., an unrestricted subsidiary of Landry’s Restaurants, Inc., completed the acquisition of Golden Nugget, Inc. (GN, formerly Poster Financial Group, Inc.), owner of the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada as further described in Note 4.

Discontinued Operations

During 2006 as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s Crab Shack units. Results of operations, assets and liabilities for all units included in the disposal plan have been reclassified to discontinued operations in the statements of income, balance sheets and segment information for all periods presented.

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. All significant inter-company accounts and transactions have been eliminated in consolidation.

Revenue Recognition

Restaurant and hospitality revenues are recognized when the goods and services are delivered. Casino revenue is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs (“casino front money”) and for chips in the customers possession (“outstanding chip liability”). Revenues are recognized net of certain sales incentives as well as accruals for the cost of points earned in point-loyalty programs. The retail value of accommodations, food and beverage, and other services furnished to hotel-casino guests without charge is deducted from revenue as promotional allowances. Proceeds from the sale of gift cards are deferred and recognized as revenue when redeemed by the holder.

Accounts Receivable

Accounts receivable is comprised primarily of amounts due from our credit card processor, receivables from national storage and distribution companies and, casino and hotel receivables. The receivables from national storage and distribution companies arise when certain of our inventory items are conveyed to these companies at cost (including freight and holding charges but without any general overhead costs). These conveyance transactions do not impact the consolidated statements of income as there is no revenue or expenses recognized in the financial statements since they are without economic substance other than drayage. We reacquire these items, although not obligated to, when subsequently delivered to the restaurants at cost plus the distribution company’s contractual mark-up. Accounts receivable are reduced to reflect estimated realizable values by an allowance for doubtful accounts based on historical collection experience and specific review of individual accounts. Receivables are written off when they are deemed to be uncollectible.

77

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Inventories

Inventories consist primarily 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 consist of the following:

	December 31,
	2006		2005
Food and beverage	$	25,146,190	$	40,501,955
Retail goods		15,298,658		15,294,047
	$	40,444,848	$	55,796,002

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.

We compute 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 40 years or lease term, including extensions where such are reasonably assured of renewal.

Leasehold improvements are depreciated over the shorter of the estimated life of the asset or the lease term plus option periods where failure to renew results in economic penalty. Any contributions made by landlords or tenant allowances with economic value are recorded as a long-term liability and amortized as a reduction to rent expense over the life of the lease plus option periods where failure to renew results in economic penalty.

Interest is capitalized in connection with 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 2006, 2005 and 2004, we capitalized interest expense of approximately $3.9 million, $1.6 million and $1.2 million respectively.

We account for long-lived assets in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-lived Assets. Our 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 assets related to discontinued operations.

Software

Software, including capitalized implementation costs, is stated at cost, less accumulated amortization and is included in other assets in our Consolidated Balance Sheets. Amortization expense is provided on the straight-line basis over estimated useful lives, which do not exceed 10 years.

78

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 rent expense and 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 rent and 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 expensed.

Advertising

Advertising costs are expensed as incurred during such year. Advertising expenses were $32.3 million, $33.5 million, and $29.6 million in 2006, 2005 and 2004, respectively.

Goodwill and Other Intangible Assets

Goodwill and trademarks are not amortized, but instead tested for impairment at least annually. Other intangible assets are amortized over their expected useful life or the life of the related agreement.

	December 31,
	2006		2005
Intangible assets subject to amortization:
Customer lists	$	3,400,000	$	3,400,000
Other		675,000		675,000
		4,075,000		4,075,000
Accumulated amortization:
Customer lists		428,778		88,778
Other		571,805		526,805
		1,000,583		615,583
Net intangible assets subject to amortization		3,074,417		3,459,417
Indefinite lived intangible assets :
Goodwill		18,527,547		18,527,547
Trademarks		36,189,913		27,574,484
		54,717,460		46,102,031
Total	$	57,791,877	$	49,561,448

Amortization expense relating to intangibles was $0.4 million, $0.2 million and $0.1 million for the years ended December 31, 2006, 2005 and 2004 respectively.

Deferred Rent

Rent expense under operating leases is calculated using the straight-line method whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are

79

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

made. Rent expense generally begins on the date we obtained possession under the lease and includes option periods where failure to renew results in economic penalty. Generally, this results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years.

The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in other long term liabilities.

Insurance

We maintain large deductible insurance policies related to property, general liability and workers’ compensation coverage. Predetermined loss limits have been arranged with insurance companies to limit our per occurrence cash outlay. Accrued liabilities include the estimated costs to settle unpaid claims and estimated incurred but not reported claims using actuarial methodologies.

Financial Instruments

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate the carrying amounts due to their short maturities. The fair value of our fixed rate long-term debt instruments are estimated based on quoted market prices, where available, or on the amount of future cash flows associated with each instrument, discounted using our current borrowing rate for comparable debt instruments. The estimated fair values of our long-term debt, including the current portions, are as follows:

	December 31,
	2006				2005
	Carrying Value		Fair Value		Carrying Value		Fair Value
7.5% Senior Notes due December 2014	$	400,000,000	$	390,860,714	$	400,000,000	$	376,000,000
8.75% senior secured notes due December 2011		158,391,867		161,837,460		159,081,197		161,393,750
7.0% Seller note due November 2010		4,000,000		4,000,000		4,000,000		4,000,000
9.39% non-recourse note payable due May 2010		10,826,017		11,509,281		11,007,078		11,294,720
	$	573,217,884	$	568,207,455	$	574,088,275	$	552,688,470

We utilize interest rate swap agreements to manage our exposure to interest rate risk. Our interest rate swap agreements qualify as fair value hedges and are recorded at fair value. As such, the gains or losses on the swaps are offset by corresponding gains or losses on the related debt.

Cash Equivalents

We consider investments with a maturity of three months or less when purchased to be cash equivalents.

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.

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Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not expect the adoption of FIN 48 to have a material impact on our financial statements.

In June 2006, the FASB ratified the consensus reached on EITF Issue No. 06-03, How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, Gross Versus Net Presentation)(EITF 06-03). The EITF reached a consensus that the presentation of taxes on either a gross or net basis is an accounting policy decision that requires disclosure. EITF 06-03 is effective for the first interim reporting period beginning after December 15, 2006. We pay gross receipts tax on liquor sales in certain jurisdictions. Our policy is to present these taxes gross within revenues and expenses. The adoption of EITF 06-03 will not have any effect on our financial position or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. SAB 108 addresses the diversity in practice of quantifying and assessing materiality of financial statement errors. It is effective for fiscal years ending after November 15, 2006 and allows for a one-time transitional cumulative effect adjustment to the opening balance of retained earnings for errors that were not previously deemed material. The adoption of SAB 108 did not have an impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 is not expected to have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, that the adoption of SFAS 159 will have on our consolidated financial statements.

2.  RESTATEMENT

As the result of recent announcements associated with stock option activity, we, as well as many companies, have reviewed our historical stock option practices. The voluntary review, which is now complete, was overseen by a Special Committee of the Board of Directors comprised of independent Directors. The Committee engaged legal counsel, which in turn engaged a forensic accounting firm to assist with the review. The scope of the review included granting of and accounting for certain employee equity awards to both senior executives of the Company and other employees from 1993 through 2005. The Special Committee issued no finding of intentional misconduct by current or former senior management or members of the Compensation or Stock Option Committees in connection with the Company’s historical stock option practices and did not conclude that current or former senior management or members of the Compensation or Stock Option Committees engaged in intentional misconduct in the administration and oversight of the Company’s stock option program. The Special

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Committee did determine that there were some deficiencies in the administration and oversight of the stock option grant processes. Although the Company has not issued any stock options since fiscal year 2004, it has amended its option granting practices, and the Board of Directors will continue to consider the report of the Special Committee regarding appropriate remedial measures to enhance the process for equity based compensation awards in the future.

The review identified certain employee stock option awards for which we had historically used an incorrect measurement date in determining the amount of compensation expense to be recognized for such employee stock option awards or failed to record compensation expense due to materiality. It was determined that the use of these incorrect measurement dates resulted primarily from administrative errors or incomplete granting actions as of the previously used measurement dates. As a result, we will restate our historical financial statements for the periods from 1993 to 2001 as outlined below to reflect these changes consistent with the finding of the outside review. The financial statement impact of these matters associated with the years 2002 through 2005 of approximately $0.3 million, $0.3 million, $0.5 million and $0.7 million in 2005, 2004, 2003 and 2002, respectively was not material to any period. Therefore, for the years 2002 through 2005, we recorded a charge of $2.8 million, or $1.8 million net of tax, in the fourth quarter of 2006. A component of this non-cash charge, or $1.1 million pre-tax and $0.8 million after tax, is classified as discontinued operations and the remainder is included in general and administrative expense in the statement of income.

The December 31, 2003 balance of additional paid-in capital was increased by $9.1 million with a corresponding decrease to retained earning to reflect the cumulative effect from prior years.

	Cumulative effect for years 2001-1993			2001			2000			1999			1998
Net income (loss), as previously reported	$	107,318,449		$	26,919,569		$	14,650,118		$	15,375,733		$	(329,578	)
Additional stock compensation expense		14,214,918			4,066,858			1,864,828			2,237,778			1,784,304
Tax effect of additional stock compensation expense, net of forfeitures		(5,132,690	)		(1,510,563	)		(676,285	)		(819,991	)		(637,768	)
After tax effect of additional stock compensation expense		9,082,228			2,556,295			1,188,543			1,417,787			1,146,536
Net income (loss), as restated	$	98,236,221		$	24,363,274		$	13,461,575		$	13,957,946		$	(1,476,114	)
	1997			1996			1995			1994			1993
Net income, as previously reported	$	27,430,044		$	1,505,573		$	11,047,682		$	6,608,308		$	4,111,000
Additional stock compensation expense		2,140,487			959,713			794,746			293,763			72,441
Tax effect of additional stock compensation expense, net of forfeitures		(762,893	)		(329,241	)		(272,942	)		(98,838	)		(24,169	)
After tax effect of additional stock compensation expense		1,377,594			630,472			521,804			194,925			48,272
Net income, as restated	$	26,052,450		$	875,101		$	10,525,878		$	6,413,383		$	4,062,728

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3.  DISCONTINUED OPERATIONS

During the third quarter of 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants including 136 Joe’s Crab Shack units. The results of operations for all stores included in our disposal plan have been classified as discontinued operations in our statements of income and segment information for all periods presented.

On November 17, 2006, we completed the sale of 120 Joe’s restaurants to JCS Holdings, LLC, an unaffiliated new entity created by J.H. Whitney Capital Partners, LLC for approximately $192.0 million, including the assumption of certain working capital liabilities to be finalized in 2007. In connection with the sale we recorded pre-tax impairment charges and a loss on disposal totaling $49.2 million ($29.8 million after tax). Under the terms of the sale, we are providing to JCS Holdings, LLC transitional support services for a period not expected to exceed twelve months. These services include, among other things, IT and purchasing support, as well as office space. Following cessation of these activities, we do not anticipate any significant continuing involvement with or cash flows from JCS Holdings, LLC.

We recorded additional pre-tax impairment charges totaling $24.9 million for the year ended December 31, 2006 to write down carrying values of assets pertaining to the remaining stores included in our disposal plan. We expect to sell the land and improvements belonging to these remaining restaurants, or abandon those locations, within the next 12 months.

In connection with the disposal plan, we recorded pre-tax charges of $1.7 million for the year ended December 31, 2006 for lease termination and other store closure costs. These charges are included in discontinued operations.

The results of discontinued operations for the years ended December 31, 2006, 2005 and 2004 were as follows:

	Year Ended December 31,
	2006			2005		2004
Revenues	$	300,029,507		$	357,346,158	$	362,572,113
Income (loss) from discontinued operations before income taxes		(84,543,106	)		21,191,862		38,959,414
Income tax (benefit) on discontinued operations		(33,253,172	)		6,719,939		13,094,259
Net income (loss) from discontinued operations	$	(51,289,934	)	$	14,471,923	$	25,865,155

Interest expense is allocated to discontinued operations based on the ratio of net assets to be discontinued to consolidated net assets. For the years ended December 31, 2006, 2005 and 2004, respectively, interest expense related to discontinued operations was $12.5 million, $10.2 million and $4.3 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assets and liabilities of the discontinued operations are presented separately in the Consolidated Balance Sheets and consist of the following:

	Year Ended December 31,
	2006		2005
Assets:
Cash	$	—	$	340,650
Other current assets		32,376		5,989,411
Property, plant and equipment, net		10,560,127		276,728,208
Other assets		85,360		1,447,356
Assets related to discontinued operations	$	10,677,863	$	284,505,625
Liabilities:
Accounts payable and accrued expenses	$	2,409,502	$	17,154,585
Other liabilities		—		6,141,698
Liabilities related to discontinued operations	$	2,409,502	$	23,296,283

4.  ACQUISITIONS

On September 27, 2005, we completed the acquisition of 100 percent of the capital stock of GN, owner of the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada, for approximately $163.0 million in cash, the assumption of $155.0 million of 8.75% Senior Secured Notes due 2011 and $27.0 million under an existing Senior Revolving Credit facility and the further assumption of certain working capital, including $27.5 million in cash. The results of GN’s operations have been included in our consolidated financial statements since the acquisition date. The assets acquired and liabilities assumed were recorded at fair market value as determined by third party appraisals and management’s plans for future operations. A summary of the assets acquired and liabilities assumed in the acquisition follows:

Current assets	$	42,597,414
Property and equipment		319,770,221
Intangible assets		29,620,000
Other long-term assets		11,156,347
Total assets acquired		403,143,982
Current liabilities		(54,239,750	)
Long-term debt		(185,904,232	)
Total liabilities assumed or created		(240,143,982	)
Net assets acquired		163,000,000
Less: Cash acquired		(27,512,502	)
Net cash paid	$	135,487,498

Acquired intangible assets include $26.2 million assigned to the trademark “Golden Nugget,” which has been in use for more than 50 years and is one of the most recognizable names in the casino industry. Also included is $3.4 million assigned to customer lists underlying the slot player clubs at each of the casinos. There was no goodwill recorded in connection with the transaction.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As a result of the acquisition, we have recorded direct acquisition costs for the estimated incremental costs to rationalize activities at the two locations and for associated employee contract terminations and severance costs. Accounting principles generally accepted in the United States, provide that these direct acquisition 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. The acquisition liabilities included in the purchase price allocation totaled approximately $4.9 million.

The following unaudited pro forma financial information presents the consolidated results of operations as if the acquisition occurred on January 1, 2005, after including certain pro forma adjustments for interest expense, depreciation and amortization, and income taxes.

	Year Ended December 31, 2005
Revenue	$	1,441,586,485
Net income	$	45,588,282
Basic earnings per share	$	1.95
Diluted earnings per share	$	1.90

The pro forma financial information is not necessarily indicative of the combined results of operations had the transaction occurred on January 1, 2005 or the results of operations that may be obtained in the future.

On February 24, 2006, one of our unrestricted subsidiaries acquired 80% of T-Rex Cafe, Inc. (“T-Rex”) from Schussler Creative, Inc. (SCI). The agreement with SCI further provides that we can acquire SCI’s 20% interest for up to $35.0 million or that SCI can put its interest to us upon certain conditions for up to $35.0 million. In such event, combined profits from all stores would have to exceed $20.0 million. In addition, we have agreed to guarantee the funding for the construction, development and pre-opening of at least three T-Rex Cafes and one Asian themed eatery over the next three to four years in an amount estimated to be approximately $48.0 million. The first of such units opened in July 2006 in Kansas City, Kansas.

T-Rex, through a wholly-owned subsidiary, on February 24, 2006, signed two lease agreements with Walt Disney World Hospitality and Recreation Corporation, one for T-Rex at Downtown Disney World (expected to open in 2008) and the other for an Asian themed eatery at Disney’s Animal Kingdom Theme Park (expected to open in fall 2007).

5.  PROPERTY AND EQUIPMENT AND OTHER ASSETS

Property and equipment is comprised of the following:

	December 31,
	2006			2005
Land	$	269,566,678		$	261,580,464
Buildings and improvements		498,620,256			417,182,755
Furniture, fixtures and equipment		278,283,093			236,547,485
Leasehold improvements		389,842,288			368,829,507
Construction in progress		23,983,197			31,783,300
		1,460,295,512			1,315,923,511
Less—accumulated depreciation		(244,669,074	)		(212,393,035	)
Property and equipment, net	$	1,215,626,438		$	1,103,530,476

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We continually evaluate unfavorable cash flows, if any, related to underperforming restaurants. Periodically it is concluded that certain properties have become impaired based on their existing and anticipated future economic outlook in their respective market areas. In such instances, we may impair assets to reduce their carrying values to fair values. We consider the asset impairment expense as additional depreciation and amortization, although shown as a separate line item in the Consolidated Statements of Income. Estimated fair values of impaired properties are based on comparable valuations, cash flows and management judgment.

As a result of our strategic review of operations in 2006, we identified certain Joe’s Crab Shack restaurants that we believed were suitable for conversion into other Landry’s concepts. Based on our review we recorded impairment charges of $8.6 million for the year ended December 31, 2006 to impair certain assets relating to these conversion units to reflect our best estimates of their fair market value. We took no impairment charges in the year ended December 31, 2005. For the year ended December 31, 2004 we recorded an asset impairment charge of approximately $1.7 million relating to one underperforming unit.

These impairment charges resulted from sales declines, deterioration in the specific restaurant’s profitability, perceived continued deterioration of the market area and/or specific location, and management’s lowered outlook for further opportunity and/or improvement in forecasted sales and profitability trends for such specific property. Assets that were impaired are primarily leasehold improvements and to a lesser extent equipment.

Other current assets are comprised of the following:

	December 31,
	2006		2005
Prepaid expenses	$	5,447,095	$	5,108,328
Assets held for sale (expected to be sold within one year)		12,437,726		2,941,507
Deposits		3,761,739		3,904,458
	$	21,646,560	$	11,954,293

Other income, net for 2006 was $2.4 million and consisted primarily of gains recognized on the sale of a restaurant property and insurance proceeds. Other expense (income) for 2005 was not material. Other expense (income) for 2004 was primarily make whole payments and related fees aggregating $14.6 million associated with the pre-payment of our $150.0 million in senior notes and Former Bank Credit Facility offset by $1.1 million in recoveries related to storm damage.

6.  ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:

	Year Ended December 31,
	2006		2005
Payroll and related costs	$	31,560,090	$	24,622,007
Rent and insurance		29,663,840		28,819,463
Taxes, other than payroll and income taxes		17,448,847		16,937,371
Deferred revenue (gift cards and certificates)		17,374,080		15,308,080
Accrued interest		5,008,244		2,805,847
Casino deposits, outstanding chips and other gaming		9,235,038		9,851,072
Other		23,272,637		15,027,637
	$	133,562,776	$	113,371,477

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7.  DEBT

In connection with the acquisition of GN, one of our unrestricted subsidiaries assumed $155.0 million in 8.75% senior secured notes due December 2011 with a fair value of $158.4 million. The notes pay interest on a semi-annual basis in June and December. The notes are guaranteed, jointly and severally, by all of GN’s current and future restricted subsidiaries on a senior secured basis. The notes are collateralized by a pledge of capital stock of GN’s future restricted subsidiaries and a security interest in substantially all of GN’s and the guarantors’ current and future assets that is junior to the security interest granted to the lenders under GN’s senior revolving credit facility. See Note 16.

Also, as a result of the acquisition of GN, we assumed $27.0 million in debt under a $43.0 million bank senior secured revolving credit facility. The revolving credit facility bears interest at Libor or at bank’s base rate plus a financing spread, 1.75% for Libor and 0.75% for base rate borrowings at December 31, 2006 and matures in January 2009. The financing spread and commitment fee increase or decrease based on a financial leverage ratio as defined in the credit agreement. As of December 31, 2006, the available borrowing capacity under the facility was $13.2 million.

The GN debt agreements contain various restrictive covenants including minimum EBITDA, fixed charge and financial leverage ratios, limitations on capital expenditures, and other restricted payments as defined in the agreements. As of December 31, 2006, GN was in compliance with all such covenants.

In December 2004, we entered into a $450.0 million “Bank Credit Facility” and “Term Loan” consisting of a $300.0 million revolving credit facility and a $150.0 million term loan. In November 2006, we utilized proceeds from the Joe’s sale to pay down approximately $109.5 million on the term loan, leaving a balance outstanding of approximately $37.8 million as of December 31, 2006. The term loan matures in December 2010 and, at December 31, 2006, bears interest at Libor plus 2.0% or the bank’s base rate plus 1.0%. Quarterly principal payments of $97,000 are due through December 2009 with the remaining balance payable in equal quarterly installments of $9.2 million in 2010. The revolving credit facility matures in December 2009 and bears interest at Libor or the bank’s base rate plus a financing spread, 2.0% for Libor and 1.0% for base rate borrowings at December 31, 2006. In addition, the revolving credit facility requires a commitment fee on the unfunded portion. The financing spread and commitment fee increases or decreases based on a financial leverage ratio as defined in the credit agreement. We and certain of our 100% owned guarantor subsidiaries granted liens on substantially all real and personal property as security under the Bank Credit Facility and Term Loan. As of December 31, 2006 our average interest rate on floating-rate debt was 7.7%, we had approximately $11.5 million in letters of credit outstanding, and our available borrowing capacity was $216.7 million.

Concurrently, we issued $400.0 million in 7.5% senior notes through a private placement which are due in December 2014. The notes are general unsecured obligations and require semi-annual interest payments in June and December. On June 16, 2005, we completed an exchange offering whereby substantially all of the senior notes issued under the private placement were exchanged for senior notes registered under the Securities Act of 1933. See Note 16.

Net proceeds from the $450.0 million Bank Credit Facility and Term Loan and $400 million in 7.5% senior notes totaled $536.6 million and were used to repay all outstanding liabilities under the Former Bank Credit Facility and $150 million in senior notes. These debt repayments resulted in a pre-tax charge of $16.6 million in the fourth quarter of 2004.

In connection with the 7.5% senior notes, we entered into two interest swap agreements with the objective of managing our exposure to interest rate risk and lowering interest expense. The first agreement was effective

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 28, 2004, maturing in December 2014, for a notional amount of $50.0 million and interest at Libor plus 2.38%. The second agreement was effective March 10, 2005, also maturing December 2014, for a notional amount of $50.0 million and interest at Libor plus 2.34%. Our interest rate swap agreements qualify as fair value hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The aggregate estimated fair value of these swaps at December 31, 2006 was a liability of $1.7 million, which is included in other liabilities with an offsetting adjustment to the carrying value of the debt on our consolidated balance sheet.

Our debt agreements contain various restrictive covenants including minimum fixed charge, net worth, and financial leverage ratios as well as limitations on dividend payments, capital expenditures and other restricted payments as defined in the agreements. At December 31, 2006, we were in compliance with all such covenants.

We 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.

Principal payments for all long-term debt aggregate $748,122 in 2007, $649,904 in 2008, $102,202,664 in 2009, $50,846,684 in 2010, $155,000,000 in 2011, and $400,000,000 thereafter.

Long-term debt is comprised of the following:

	December 31,
	2006			2005
$300.0 million Bank Syndicate Credit Facility, Libor + 2.0% interest only, due December 2009	$	71,771,982		$	74,000,000
$150.0 million Term loan facility, Libor + 1.75%, interest paid quarterly, $97,000 principal paid quarterly, due December 2010		37,832,754			148,500,000
$400.0 million Senior Notes, 7.5% interest only, due December 2014		400,000,000			400,000,000
Non-recourse long-term note payable, 9.39% interest, principal and interest aggregate $101,762 monthly, due May 2010		10,826,014			11,007,078
Other long-term notes payable with various interest rates, principal and interest paid monthly		230,047			399,004
$155.0 million GN senior secured notes, 8.75% interest only, due December 2011		158,391,867			159,081,197
$43.0 million GN senior secured revolving credit facility, Libor + 1.75%, interest only, due January 2009		29,802,331			22,001,719
$4.0 million seller note, 7.0%, interest paid monthly, due November 2010		4,000,000			4,000,000
Interest rate swap		(1,650,676	)		(1,093,458	)
Total debt		711,204,319			817,895,540
Less current portion		(748,122	)		(1,851,741	)
Long-term portion	$	710,456,197		$	816,043,799

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8.  STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE

In connection with our stock buy back programs, we repurchased into treasury approximately 4,824,000 and 2,292,000 shares of common stock for approximately $133.8 million and $62.8 million in 2005 and 2004 respectively. Cumulative repurchases as of December 31, 2006 were 17.6 million shares at a cost of approximately $290.5 million.

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. In April 2004, this was increased to $0.20 per share, paid in quarterly installments of $0.05 per share.

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

A reconciliation of the amounts used to compute earnings per share is as follows:

	Year Ended December 31,
	2006			2005		2004
Income from continuing operations	$	29,520,211		$	30,343,113	$	40,656,573
Income (loss) from discontinued operations, net of taxes		(51,289,934	)		14,471,923		25,865,155
Net income (loss)	$	(21,769,723	)	$	44,815,036	$	66,521,728
Weighted average common shares outstanding—basic		21,300,000			22,300,000		27,000,000
Dilutive common stock equivalents:
Stock options		670,000			685,000		800,000
Restricted stock		30,000			15,000		—
Weighted average common and common share equivalents outstanding—diluted		22,000,000			23,000,000		27,800,000
Earnings (loss) per share—basic
Income from continuing operations	$	1.39		$	1.36	$	1.50
Income (loss) from discontinued operations, net of taxes		(2.41	)		0.65		0.96
Net income (loss)	$	(1.02	)	$	2.01	$	2.46
Earnings (loss) per share—diluted
Income from continuing operations	$	1.34		$	1.32	$	1.46
Income (loss) from discontinued operations, net of taxes		(2.33	)		0.63		0.93
Net income (loss)	$	(0.99	)	$	1.95	$	2.39

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9.  STOCK-BASED COMPENSATION

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

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.

The Company maintained two stock option plans, which were originally adopted in 1993, (the Stock Option Plans), as amended, pursuant to which options were 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 were administered by the Compensation Committee of the Board of Directors (the Committee), which determined at its discretion, the number of shares subject to each option granted and the related purchase price, vesting and option periods. Options are no longer issued under either plan, however, options previously issued under the stock option plans are still outstanding.

The Company also maintained 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 received 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 issued under the Flex Plan (or with respect to which awards may be granted) were not in excess of 2,000,000 shares. Options are no longer issued under the Flex Plan, however, options previously issued are still outstanding.

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

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.

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. The options issued to our CEO are all vested.

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.

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 $8.50 and expire ten years from the date of grant. These options vest in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. In December 2006, certain options to a member of senior management were increased to an exercise price of $9.65. The options issued to our CEO are all vested.

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 $8.50 and $15.80, respectively, 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.

In addition, we have issued pursuant to an employment agreement, over its five year term, 775,000 shares of restricted stock, 500,000 shares which vest 10 years from the grant date, and 275,000 shares which vest 7 years from the grant date. In addition, 250,000 stock options have also been granted pursuant to the employment agreement.

In April 2006, 102,000 restricted common shares were issued to key employees vesting ratably over five years and 8,000 restricted common shares were granted to non-employee directors vesting ratably over two years. 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 December 2004, the FASB issued SFAS No. 123R, Share-Based Payments. SFAS No. 123R requires the recognition of the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant.

Prior to January 1, 2006, we accounted for awards granted under our stock-based employee compensation plans following the recognition and measurement principles of Accounting Principles Bulletin Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) and related interpretations. Under APB 25, no compensation expense is recognized when the option price is greater than or equal to the market price of the underlying stock on the date of grant. We generally did not recognize compensation expense in connection with stock option awards to employees, directors and officers under our plans. See Note 2. Under the provisions of SFAS 123, the pro forma effects on income for stock options were instead disclosed in a footnote to the financial statements. Compensation expense was recorded in the income statement for restricted stock awards over the vesting period of the award.

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123R, “Share-Based Payment,” (“SFAS 123R”), using the modified prospective application method. Under this transition method, we will record compensation expense for all stock option awards granted after the date of adoption and for the unvested portion of previously granted stock option awards that remain outstanding at the date of adoption. The amount of compensation cost recognized was based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123. Under the provisions of SFAS 123-R, the recognition of unearned compensation, a contra-equity account representing the amount of unrecognized restricted stock compensation expense, is no longer required. Therefore, in the first quarter of 2006 the unearned compensation amount that was included in our December 31, 2005 consolidated balance sheet in the amount of $6.4 million was reduced to zero with a corresponding decrease to capital in excess of par value. Results for prior periods have not been restated upon adoption of 123R.

In addition to the amounts described in Note 2, stock-based compensation expense totaling $4.8 million is included in general and administrative expense for the year ended December 31, 2006. As a result of adopting

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SFAS No. 123R on January 1, 2006, incremental stock-based compensation expense recognized was $2.3 million ($1.8 million after tax) which impacted basic and diluted earnings per share by $.08, for the year ended December 31, 2006. Stock-based compensation expense is not reported at the segment level as these amounts are not included in internal measurements of segment operating performance.

Had we adopted the fair value method of SFAS No. 123 prior to January 1, 2006, our net income and earnings per share would have been as follow:

	Year ended December 31,
	2005			2004
Net income, as reported	$	44,815,036		$	66,521,728
Less: pro forma stock option compensation expense, net of tax		(1,625,000	)		(1,200,000	)
	$	43,190,036		$	65,321,728
Pro forma net income
Earnings per share:
Basic—as reported	$	2.01		$	2.46
Basic—pro forma	$	1.94		$	2.42
Diluted—as reported	$	1.95		$	2.39
Diluted—pro forma	$	1.88		$	2.35

Stock option plan activity for the year ended December 31, 2006 is summarized below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Options outstanding January 1, 2006	1,897,252		$	16.22	5.9	—
Granted	—			—	—	—
Exercised	(264,785	)		—	—	3,677,893
Canceled or expired	(90,512	)		—	—	—
Options outstanding December 31, 2006	1,541,955		$	16.86	5.0	20,401,933
Options exercisable December 31, 2006	1,282,722		$	15.37	4.6	18,883,028

No options were granted during 2006 or 2005. The total intrinsic value of options exercised during the year ended December 31, 2006 was $3.7 million. As of December 31, 2006, there was $19.0 million and $2.6 million of unrecognized compensation expense related to non-vested restricted stock awards and stock options, respectively, which will be recognized over the remaining requisite service period. Cash proceeds received from options exercised was $2.7 million, $0.5 million and $1.3 million for the years ended December 31, 2006, 2005 and 2004, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Restricted stock activity for the year ended December 31, 2006 is summarized below:

	Shares		Average Grant Date Fair Value Per Award
Non-vested as of January 1, 2006	300,000		$	25.32
Granted	503,773		$	31.29
Vested	—		$	—
Canceled or expired	(18,853	)	$	35.00
Non-vested as of December 31, 2006	784,920		$	28.92

10.  INCOME TAXES

An analysis of the provision for income taxes for continuing operations for the years ended December 31, 2006, 2005, and 2004 is as follows:

	2006		2005		2004
Tax provision:
Current income taxes	$	6,456,667	$	2,524,321	$	(7,021,641	)
Deferred income taxes		4,293,397		11,363,884		(2,527,840	)
Total provision	$	10,750,064	$	13,888,205	$	(9,549,481	)

Our effective tax rate, for the years ended December 31, 2006, 2005, and 2004, differs from the federal statutory rate as follows:

	2006		2005		2004
Statutory rate	35.0	%	35.0	%	35.0	%
FICA tax credit	(12.6	)	(10.7	)	(13.4	)
State income tax, net of federal tax benefit	3.9		3.8		2.1
Recognition of tax carryforward assets and other tax attributes	(6.7	)	(0.5	)	(60.7	)
Other	7.1		3.8		6.3
	26.7	%	31.4	%	(30.7	)%

In 2004 there was a revision to the valuation allowance and deferred tax liabilities aggregating a net benefit of $18.5 million. The valuation allowance and certain deferred tax liabilities were reduced for the following reasons: the strength of the 2004 earnings; the future forecasted taxable income of the Company; the approaching end to specific recognition limitations (i.e., built-in limitations) on allowable deductions; and the closing of audits with favorable results. Management believes that the combination of the above factors indicates that a portion of the deferred tax assets previously reserved would more than likely than not be realized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred income tax assets and liabilities as of December 31, 2006 and 2005 are comprised of the following:

	2006			2005
Deferred Income Taxes:
Current assets—accruals and other	$	17,044,000		$	12,764,000
Non-current assets:
AMT credit, FICA credit carryforwards, and other	$	34,980,000		$	32,870,000
Federal net operating loss carryforwards		25,371,000			27,777,000
Deferred rent and unfavorable leases		9,151,000			8,123,000
Valuation allowance for NOL and credit carryforwards		(7,886,000	)		(8,713,000	)
Non-current deferred tax asset		61,616,000			60,057,000
Non-current liabilities—property and other		(59,935,000	)		(81,693,000	)
Net non-current tax asset (liability)	$	1,681,000		$	(21,636,000	)
Total net deferred tax asset (liability)	$	18,725,000		$	(8,872,000	)

At December 31, 2006 and 2005, we had operating loss carryovers for Federal Income Tax purposes of $68.3 million and $75.2 million, respectively, which expire in 2019 through 2025. These operating loss carryovers, credits, and certain other deductible temporary differences, are related to the acquisitions of Rainforest Cafe and Saltgrass Steak House, and their utilization is subject to Section 382 limits. Because of these limitations, we established a valuation allowance against a portion of these deferred tax assets to the extent it was more likely than not that these tax benefits will not be realized. In 2006 and 2005, there was a reduction of the valuation allowance and deferred tax liabilities aggregating $0.6 million and $1.1 million, respectively. The valuation allowance and certain deferred tax liabilities were reduced for current year projected NOL utilization or expiration.

The 2006 state rate benefit was decreased due to minimum tax jurisdictions and to provide for certain state income tax filing positions. We are currently being audited by several states with regard to state income and franchise tax for periods prior to 2006.

At December 31, 2006 and 2005, we have general business tax credit carryovers and minimum tax credit carryovers of $28.0 million and $28.0 million, respectively. The general business carryover includes $1.5 million from Saltgrass Steak House, which is fully reserved. The general business credit carryovers expire in 2010 through 2026, while the minimum tax credit carryovers have no expiration date. The use of these credits is limited if we are subject to the alternative minimum tax. We believe it is more likely than not that we will generate sufficient income in future years to utilize the non-reserved credits.

In May 2006, Texas enacted a new law that changed the existing franchise tax with a “margin” based franchise tax. The margin tax is effective January 1, 2007 and affects a wide range of entities doing business in Texas. The tax is assessed at 1% of taxable margin apportioned to Texas, with the exception for those entities engaged in retail or considered eating and drinking establishments, which have a reduced rate of 0.5%. We believe that current operations will meet the requirements to obtain the reduced margin tax rate. In accordance with FASB Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”, we have recalculated our deferred tax assets and liabilities based on the change in tax law. The effect of the Margin Tax decreased our net deferred tax position resulting in approximately a $0.2 million reduction in the deferred state income tax provision for the year ended December 31, 2006.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.  COMMITMENTS AND CONTINGENCIES

Lease Commitments

We have entered into lease commitments for restaurant facilities as well as certain fixtures, equipment and leasehold improvements. Under most of the facility lease agreements, we 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 $61.3 million, $57.5 million and $56.4 million, during the years ended December 31, 2006, 2005, and 2004, respectively. Percentage rent included in rent expense was $14.8 million, $13.8 million, and $13.6 million, for 2006, 2005, and 2004, respectively. In connection with certain of our discontinued operations, we remain the guarantor or assignor of a number of leased locations. In the event of future defaults under any of such leased locations we may be responsible for significant damages to existing landlords which may materially affect our financial condition, operating results and / or cash flows.

In 2004, we entered into an aggregate $25.5 million equipment operating lease agreement replacing two existing agreements and including additional equipment. The lease expires in 2014. We guarantee a minimum residual value related to the equipment of approximately 66% of the total amount funded under the agreement. We may purchase the leased equipment throughout the lease term for an amount equal to the unamortized lease balance. In 2006, we sold one piece of equipment reducing the aggregate amount outstanding by $4.1 million. We believe that the remaining equipments’ fair value is sufficient such 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 unfavorable leases, rent abatements, and scheduled increases in rent. Such amounts are recorded as other long-term liabilities in our consolidated balance sheets, 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, including options where failure to exercise such options would result in economic penalty.

The aggregate amounts of minimum operating lease commitments maturing in each of the five years and thereafter subsequent to December 31, 2006 are as follows:

2007	$	38,160,390
2008		34,648,925
2009		32,690,584
2010		30,080,133
2011		26,517,513
Thereafter		245,024,332
	$	407,121,877

Building Commitments

As of December 31, 2006, we had future development, land purchases and construction commitments expected to be expended within the next twelve months of approximately $9.7 million, including completion of construction of certain new restaurants. We expect to incur approximately $62.0 million related to renovations and expansion of the Golden Nugget Hotel and Casino in Las Vegas, Nevada.

In connection with our purchase of an 80% interest in the restaurant concept T-Rex in February 2006, we have committed to spend an estimated $48.0 million during 2006, 2007 and 2008 to complete one T-Rex

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

restaurant in Kansas City, Kansas, construct one T-Rex restaurant as well as an Asian themed restaurant in Walt Disney World Florida theme parks and construct an additional T-Rex restaurant.

In 2003, we purchased the Flagship Hotel and Pier from the City of Galveston, Texas, subject to an existing lease. Under this agreement, we have committed to spend an additional $15.0 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 and renovations are not expected to begin until 2009.

Employee Benefits and Other

We sponsor qualified defined contribution retirement plans (401(k) Plan) covering eligible salaried employees. The 401(k) Plans allows eligible employees to contribute, subject to Internal Revenue Service limitations on total annual contributions, up to 100% of their base compensation as defined in the 401(k) Plans, to various investment funds. We match in cash at a discretionary rate which totaled $0.3 million in both 2006 and 2005. Employee contributions vest immediately while our contributions vest 20% annually beginning in the participant’s second year of eligibility for restaurant and hospitality employees and in the participant’s first year of eligibility for casino employees.

We also initiated non-qualified defined contribution retirement plans (the “Plans”) covering certain management employees. The Plans allow eligible employees to defer receipt of their base compensation and of their eligible bonuses, as defined in the Plans. We match in cash at a discretionary rate which totaled $0.3 million and $0.3 in 2006 and 2005, respectively. Employee contributions vest immediately while our contributions vest 20% annually. We established a Rabbi Trust to fund the Plan’s obligation for the restaurant and hospitality employees. The market value of the trust assets is included in other assets, and the liability to the Plans’ participants is included in other liabilities.

Our casino employees at the Golden Nugget in Las Vegas, Nevada that are members of various unions are covered by union-sponsored, collective bargained, multi-employer health and welfare and defined benefit pension plans. Under our obligation to these plans we recorded expenses of $11.9 million and $2.2 million for the years ended 2006 and 2005, respectively. The plans’ sponsors have not provided sufficient information to permit us to determine its share of unfunded vested benefits, if any. However, based on available information, we do not believe that unfunded amounts attributable to our casino operations are material.

We are self-insured for most health care benefits for our non-union casino employees. The liability for claims filed and estimates of claims incurred but not reported is included in “accrued liabilities” in the accompanying Consolidated Balance Sheets as of December 31, 2006 and 2005.

Litigation and Claims

On April 4, 2006, a purported class action lawsuit was filed against Joe’s Crab Shack—San Diego, Inc. in the Superior Court of California in San Diego by Kyle Pietrzak and others similarly situated. The lawsuit alleges that the defendant violated wage and hour laws, including the failure to pay hourly and overtime wages, failure to provide meal periods and rest periods, failing to provide minimum reporting time pay, failing to compensate employees for required expenses, including the expense to maintain uniforms, and violations of the Unfair Competition Law. In June 2006, the lawsuit was amended to include Kristina Brask as a named plaintiff and named Crab Addison, Inc. and Landry’s Seafood House—Arlington, Inc. as additional defendants. We have reached a tentative settlement agreement which we expect to submit to the court and fully accrued the amount, which is not believed to be material to our financial position. There is no certainty, however, that the settlement agreement, when submitted, will be approved by the court.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On February 18, 2005, and subsequently amended, a purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in Los Angeles by Dustin Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior Court in San Bernardino. The lawsuits allege that Rainforest Cafe violated wage and hour laws, including not providing meal and rest breaks, uniform violations and failure to pay overtime. The Plaintiffs seek to recover damages, including unpaid wages, reimbursement for uniform expenses and penalties imposed by state law. The Company denies Plaintiff’s claims and intends to vigorously defend this matter. As the litigation is in the early stages of the legal process, and given the inherent uncertainties of litigation, the ultimate outcome cannot be predicted at this time, nor can the amount of any potential loss be reasonably estimated.

On August 21, 2006 and subsequently amended on January 5, 2007, a purported shareholder derivative action entitled Albert D. Hulliung, derivatively on Behalf of Nominal Defendant Landry’s Restaurants, Inc. was brought against certain members of our Board of Directors and certain of our current and former executive officers in the District Court of Harris County, Texas. The lawsuit alleges breach of fiduciary duties, unjust enrichment and other violations of law relating to the Company’s historical stock option practices. Plaintiff seeks to recover damages in the favor of the Company for damages sustained by the Company, disgorgement of profits, and attorney’s fees and expenses. The Company has formed an independent special committee of the Board of Directors to investigate the allegations and has filed a motion with the court to stay the proceedings pending the outcome of the investigation.

On August 1, 2007, we filed a lawsuit in Federal District Court in the Southern District of Texas—Galveston Division against U.S. Bank, National Association, et. al., the Indenture Trustee under the Company’s $400.0 million Senior Notes (“Notes”) for wrongful acceleration of the Notes due to an alleged event of default resulting from our failure to timely file with the Securities and Exchange Commission and deliver this Form 10-K to the Indenture Trustee all within the time periods specified by the rules and regulations of the Securities and Exchange Commission “SEC”. We obtained a Temporary Restraining Order halting the acceleration and reinstating the Notes pending a temporary injunction hearing currently scheduled for August 16, 2007. We are seeking a declaratory judgment that the Notes were improperly accelerated and damages.

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.

12.  SEGMENT INFORMATION

Our operating segments are aggregated into reportable business segments based primarily on the similarity of their economic characteristics, products, services, and delivery methods. Following the acquisition of the Golden Nugget Hotels and Casinos on September 27, 2005 (Note 4), it was determined that we operate two reportable business segments as follows:

Restaurant and Hospitality

Our restaurants operate primarily under the names of Rainforest Cafe, Saltgrass Steak House, Landry’s Seafood House, The Crab House, Charley’s Crab and The Chart House. As of December 31, 2006, we owned and operated 179 full-service and limited-service restaurants in 30 states. We are also engaged in the ownership and operation of select hospitality and entertainment businesses that complement our restaurant operations and provide our customers with unique dining, leisure and entertainment experiences.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Gaming

We operate the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nevada. These locations emphasize the creation of the best possible gaming and entertainment experience for their customers by providing a combination of comfortable and attractive surroundings. This is accomplished through luxury rooms and amenities coupled with competitive gaming tables and superior player rewards programs.

The accounting policies of the segments are the same as described in Note 1. We evaluate segment performance based on unit level profit, which excludes general and administrative expense, depreciation expense, net interest expense and other non-operating income or expense. Financial information by reportable business segment is as follows:

	Year Ended December 31,
	2006			2005			2004
Revenue:
Restaurant and Hospitality	$	902,923,082		$	831,818,786		$	804,903,052
Gaming		231,378,065			65,640,727			—
	$	1,134,301,147		$	897,459,513		$	804,903,052
Unit level profit:
Restaurant and Hospitality	$	168,630,560		$	158,622,975		$	147,476,461
Gaming		48,742,428			11,831,482			—
	$	217,372,988		$	170,454,457		$	147,476,461
Depreciation, amortization and impairment:
Restaurant and Hospitality	$	53,883,635		$	42,005,850		$	40,667,691
Gaming		12,217,760			2,754,850			—
	$	66,101,395		$	44,760,700		$	40,667,691
Segment assets:
Restaurant and Hospitality	$	756,619,394		$	1,018,786,122		$	977,299,095
Gaming		495,962,913			399,255,215			—
Corporate and other(1)		212,329,644			194,537,476			367,653,179
	$	1,464,911,951		$	1,612,578,813		$	1,344,952,274
Capital expenditures:
Restaurant and Hospitality	$	100,793,632		$	85,033,748		$	105,331,189
Gaming		94,922,458			11,391,309			—
Corporate and other		9,840,214			22,061,998			5,339,182
	$	205,556,304		$	118,487,055		$	110,670,371
Income before taxes:
Unit level profit	$	217,372,988		$	170,454,457		$	147,476,461
Depreciation, amortization and impairment		66,101,395			44,760,700			40,667,691
General and administrative		57,977,361			47,442,596			48,445,610
Pre opening expenses		6,230,465			3,030,611			3,234,018
Interest expense, net		49,215,393			31,207,629			10,845,576
Other expenses (income)		(2,421,901	)		(218,397	)		13,176,474
Consolidated income from continuing operations before taxes	$	40,270,275		$	44,231,318		$	31,107,092

(1) Includes inter-segment eliminations

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.  SUPPLEMENTAL GUARANTOR INFORMATION

In December 2004, we issued, in a private offering, $400.0 million of 7.5% senior notes due in 2014 (see “Debt”). In June 2005, substantially all of these notes were exchanged for substantially identical notes in an exchange offer registered under the Securities Act of 1933. These notes are fully and unconditionally guaranteed by us and certain of our 100% owned subsidiaries, “Guarantor Subsidiaries”.

The following condensed consolidating financial statements present separately the financial position, results of operations and cash flows of our Guarantor Subsidiaries and Non-guarantor Subsidiaries on a combined basis with eliminating entries.

Condensed Consolidating Financial Statements

Balance Sheet

December 31, 2006

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—	$	9,982,920		$	23,403,386		$	(2,117,364	)	$	31,268,942
Accounts receivable—trade and other, net		10,071,384		8,218,502			8,282,445			—			26,572,331
Inventories		22,487,193		13,612,388			4,345,267			—			40,444,848
Deferred taxes		15,466,541		—			1,577,921			—			17,044,462
Assets related to discontinued operations		10,100,000		577,863			—			—			10,677,863
Other current assets		1,358,868		3,219,319			17,068,373			—			21,646,560
Total current assets		59,483,986		35,610,992			54,677,392			(2,117,364	)		147,655,006
PROPERTY AND EQUIPMENT, net		45,824,759		659,796,397			510,005,282			—			1,215,626,438
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,501,733		103,195			37,659,402			—			39,264,330
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		952,178,263		(226,316,235	)		(320,929,033	)		(404,932,995	)		—
OTHER ASSETS, net		30,519,067		1,018,427			12,301,136			—			43,838,630
Total assets	$	1,089,507,808	$	488,740,323		$	293,714,179		$	(407,050,359	)	$	1,464,911,951
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	41,050,233	$	28,810,669		$	7,497,745		$	—		$	77,358,647
Accrued liabilities		29,625,479		65,837,774			38,099,523			—			133,562,776
Income taxes payable		—		—			2,810,811			(2,050,920	)		759,891
Current portion of long-term debt and other obligations		407,317		—			340,805			—			748,122
Liabilities related to discontinued operations		207,571		2,201,931			—			—			2,409,502
Total current liabilities		71,290,600		96,850,374			48,748,884			(2,050,920	)		214,838,938
LONG-TERM NOTES, NET OF CURRENT PORTION		507,635,058		—			202,821,139			—			710,456,197
DEFERRED TAXES		—		—			7,920,788			(7,920,788	)		—
OTHER LIABILITIES		15,874,687		14,384,979			14,649,687			—			44,909,353
Total liabilities		594,800,345		111,235,353			274,140,498			(9,971,708	)		970,204,488
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDERS’ EQUITY		494,707,463		377,504,970			19,573,681			(397,078,651	)		494,707,463
Total liabilities and stockholders’ equity	$	1,089,507,808	$	488,740,323		$	293,714,179		$	(407,050,359	)	$	1,464,911,951

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Balance Sheet

December 31, 2005

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,655,367	$	10,032,264		$	25,187,281		$	—		$	38,874,912
Accounts receivable—trade and other, net		7,339,839		8,080,135			5,299,079			—			20,719,053
Inventories		38,668,993		13,426,002			3,701,007			—			55,796,002
Deferred taxes		12,763,948		—			—			—			12,763,948
Assets related to discontinued operations		—		284,505,625			—			—			284,505,625
Other current assets		1,384,892		2,889,851			7,679,550			—			11,954,293
Total current assets		63,813,039		318,933,877			41,866,917			—			424,613,833
PROPERTY AND EQUIPMENT, net		74,902,018		626,067,500			402,560,958			—			1,103,530,476
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,268,604		148,195			29,617,102			—			31,033,901
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		1,078,572,314		(516,163,662	)		(236,587,317	)		(325,821,335	)		—
OTHER ASSETS, net		22,274,045		1,216,028			11,382,983			—			34,873,056
Total assets	$	1,240,830,020	$	448,729,485		$	248,840,643		$	(325,821,335	)	$	1,612,578,813
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	47,452,766	$	25,231,985		$	10,376,868		$	—		$	83,061,619
Accrued liabilities		15,240,460		64,415,160			33,715,857			—			113,371,477
Income taxes payable		3,294,035		—			1,766,850			—			5,060,885
Current portion of long-term debt and other obligations		1,538,930		—			312,811			—			1,851,741
Liabilities related to discontinued operations		811,246		22,485,037			—			—			23,296,283
Total current liabilities		68,337,437		112,132,182			46,172,386			—			226,642,005
LONG-TERM NOTES, NET OF CURRENT PORTION		619,994,855		—			196,048,944			—			816,043,799
DEFERRED TAXES		21,635,903		—			—			—			21,635,903
OTHER LIABILITIES		14,091,364		15,716,471			1,678,810			—			31,486,645
Total liabilities		724,059,559		127,848,653			243,900,140			—			1,095,808,352
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDERS’ EQUITY		516,770,461		320,880,832			4,940,503			(325,821,335	)		516,770,461
Total liabilities and stockholders’ equity	$	1,240,830,020	$	448,729,485		$	248,840,643		$	(325,821,335	)	$	1,612,578,813

100

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Income Statement

Year Ended December 31, 2006

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries		Eliminations			Consolidated Entity
REVENUES	$	4,150,695		$	864,644,731		$	265,505,721	$	—		$	1,134,301,147
OPERATING COSTS AND EXPENSES:
Cost of Revenues		—			238,840,498			20,154,041		—			258,994,539
Labor		—			258,735,438			111,020,058		—			369,755,496
Other operating expenses		2,602,937			204,800,876			80,774,311		—			288,178,124
General and administrative expenses		56,723,237			1,254,124			—		—			57,977,361
Depreciation and amortization		3,636,675			39,776,377			14,052,067		—			57,465,119
Asset impairment expense		145,409			8,490,867			—		—			8,636,276
Pre-opening expenses		(3,334	)		4,753,069			1,480,730		—			6,230,465
Total operating costs and expenses		63,104,924			756,651,249			227,481,207		—			1,047,237,380
OPERATING INCOME		(58,954,229	)		107,993,482			38,024,514		—			87,063,767
OTHER EXPENSES (INCOME):
Interest expense, net		33,346,728			476,022			15,392,643		—			49,215,393
Other, net		(1,173,718	)		(2,206,735	)		958,552		—			(2,421,901	)
Total other expense		32,173,010			(1,730,713	)		16,351,195		—			46,793,492
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(91,127,239	)		109,724,195			21,673,319		—			40,270,275
PROVISION (BENEFIT) FOR INCOME TAXES		(29,678,480	)		33,428,140			7,000,404		—			10,750,064
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(61,448,759	)		76,296,055			14,672,915		—			29,520,211
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		(31,578,280	)		(19,711,654	)		—		—			(51,289,934	)
EQUITY IN EARNINGS OF SUBSIDIARIES		71,257,316			—			—		(71,257,316	)		—
NET INCOME (LOSS)	$	(21,769,723	)	$	56,584,401		$	14,672,915	$	(71,257,316	)	$	(21,769,723	)

101

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Income Statement

Year Ended December 31, 2005

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES	$	4,703,194		$	797,811,844		$	94,944,475		$	—		$	897,459,513
OPERATING COSTS AND EXPENSES:
Cost of Revenues		—			222,869,987			10,720,942			—			233,590,929
Labor		—			232,701,093			37,123,407			—			269,824,500
Other operating expenses		2,875,014			189,401,127			31,313,486			—			223,589,627
General and administrative expenses		47,442,596			—			—			—			47,442,596
Depreciation and amortization		3,224,100			37,800,893			3,735,707			—			44,760,700
Asset impairment expense		—			—			—			—			—
Pre-opening expenses		—			2,347,869			682,742			—			3,030,611
Total operating costs and expenses		53,541,710			685,120,969			83,576,284			—			822,238,963
OPERATING INCOME		(48,838,516	)		112,690,875			11,368,191			—			75,220,550
OTHER EXPENSES (INCOME):
Interest expense, net		26,338,664			—			4,868,965			—			31,207,629
Other, net		58,421			(189,458	)		(87,360	)		—			(218,397	)
Total other expense		26,397,085			(189,458	)		4,781,605			—			30,989,232
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(75,235,601	)		112,880,333			6,586,586			—			44,231,318
PROVISION (BENEFIT) FOR INCOME TAXES		(29,044,243	)		41,160,453			1,771,995						13,888,205
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(46,191,358	)		71,719,880			4,814,591			—			30,343,113
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		(20,481,038	)		34,952,961			—			—			14,471,923
EQUITY IN EARNINGS OF SUBSIDIARIES		111,487,432			—			—			(111,487,432	)		—
NET INCOME (LOSS)	$	44,815,036		$	106,672,841		$	4,814,591		$	(111,487,432	)	$	44,815,036

102

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Income Statement

Year Ended December 31, 2004

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES	$	3,548,026		$	780,541,130		$	20,813,896		$	—		$	804,903,052
OPERATING COSTS AND EXPENSES:
Cost of Revenues		—			220,451,601			4,987,068			—			225,438,669
Labor		—			225,898,539			6,428,801			—			232,327,340
Other operating expenses		2,218,765			189,882,696			7,559,121			—			199,660,582
General and administrative expenses		48,445,610			—			—			—			48,445,610
Depreciation and amortization		3,162,150			35,300,805			496,082			—			38,959,037
Asset impairment expense		—			1,708,654			—			—			1,708,654
Pre-opening expenses		—			3,234,018			—			—			3,234,018
Total operating costs and expenses		53,826,525			676,476,313			19,471,072			—			749,773,910
OPERATING INCOME		(50,278,499	)		104,064,817			1,342,824			—			55,129,142
OTHER EXPENSES (INCOME):
Interest expense, net		9,804,527			—			1,041,049			—			10,845,576
Other, net		13,527,432			(350,672	)		(286	)		—			13,176,474
		23,331,959			(350,672	)		1,040,763			—			24,022,050
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(73,610,458	)		104,415,489			302,061			—			31,107,092
PROVISION (BENEFIT) FOR INCOME TAXES		(4,442,929	)		(5,121,833	)		15,281			—			(9,549,481	)
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(69,167,529	)		109,537,322			286,780			—			40,656,573
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		(14,214,061	)		40,079,216			—			—			25,865,155
EQUITY IN EARNINGS OF SUBSIDIARIES		149,903,318			—			—			(149,903,318	)		—
NET INCOME (LOSS)	$	66,521,728		$	149,616,538		$	286,780		$	(149,903,318	)	$	66,521,728

103

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Statement of Cash Flows

Year Ended December 31, 2006

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	(21,769,723	)	$	56,584,401		$	14,672,915		$	(71,257,316	)	$	(21,769,723	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,634,607			55,236,584			14,392,067			—			73,263,258
Asset impairment expense		145,409			79,932,135			—			—			80,077,544
Deferred tax provision (benefit)		(27,856,094	)		—			(1,466,817	)		—			(29,322,911	)
Deferred rent and other charges (income), net		643,647			(1,514,252	)		161,068			—			(709,537	)
Stock-based compensation expense		7,369,292			—			240,382			—			7,609,674
Change in assets and liabilities, net and other, net of acquisitions		133,881,060			(296,689,470	)		110,152,615			69,139,952			16,484,157
Total adjustments		117,817,921			(163,035,003	)		123,479,315			69,139,952			147,402,185
Net cash provided (used) by operating activities		96,048,198			(106,450,602	)		138,152,230			(2,117,364	)		125,632,462
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and/or transfers		16,047,795			(79,098,267	)		(142,505,832	)		—			(205,556,304	)
Proceeds from disposition of property and equipment		1,811,516			185,158,024			2,941,896			—			189,911,436
Business acquisitions, net of cash acquired		—			—			(7,860,857	)		—			(7,860,857	)
Net cash provided used in investing activities		17,859,311			106,059,757			(147,424,793	)		—			(23,505,725	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common stock for treasury		(2,812,893	)		—			—			—			(2,812,893	)
Proceeds from exercise of stock options		2,739,766			—			—			—			2,739,766
Payments of debt and related expenses, net		(110,903,233	)		—			(311,093	)		—			(111,214,326	)
Proceeds from credit facility		333,000,000			—			99,649,258			—			432,649,258
Payments on credit facility		(335,228,018	)		—			(91,848,646	)		—			(427,076,664	)
Dividends paid		(4,358,498	)		—			—			—			(4,358,498	)
Net cash provided (used) in financing activities		(117,562,876	)		—			7,489,519			—			(110,073,357	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(3,655,367	)		(390,845	)		(1,783,044	)		(2,117,364	)		(7,946,620	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		3,655,367			10,372,914			25,187,281			—			39,215,562
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	—		$	9,982,069		$	3,404,237		$	(2,117,364	)	$	31,268,942

104

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Statement of Cash Flows

Year Ended December 31, 2005

	Parent			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	44,815,036		$	106,672,841		$	4,814,591		$	(111,487,432	)	$	44,815,036
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,224,100			56,532,940			3,735,707			—			63,492,747
Impairment		—			—			—			—			—
Deferred tax provision (benefit)		9,698,299			—			—			—			9,698,299
Deferred rent and other charges (income), net		2,245,752			(2,620,941	)		213,987			—			(161,202	)
Stock-based compensation expense		689,493			—			—			—			689,493
Changes in assets and liabilities, net and other, net of acquisitions		(183,144,942	)		(84,699,317	)		188,878,472			111,487,432			32,521,645
Total adjustments		(167,287,298	)		(30,787,318	)		192,828,166			111,487,432			106,240,982
Net cash provided by (used in) operating activities		(122,472,262	)		75,885,523			197,642,757			—			151,056,018
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and / or transfers		(8,759,223	)		(73,436,087	)		(36,291,745	)		—			(118,487,055	)
Proceeds from disposition of property and equipment		364,466			2,000,000			1,685,298			—			4,049,764
Business acquisitions, net of cash acquired		—			—			(135,487,498	)		—			(135,487,498	)
Net cash used in investing activities		(8,394,757	)		(71,436,087	)		(170,093,945	)		—			(249,924,789	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common stock		(125,651,865	)		—			—			—			(125,651,865	)
Proceeds from exercise of stock options		451,775			—			—			—			451,775
Payments on other debt and related expenses, net		(2,345,461	)		—			(16,664,682	)		—			(19,010,143	)
Proceeds from credit facility		108,000,000			—			17,000,000			—			125,000,000
Payments on credit facility		(34,000,000	)		—			(5,488,102	)		—			(39,488,102	)
Dividends paid		(4,611,364	)		—			—			—			(4,611,364	)
Net cash used in financing activities		(58,156,915	)		—			(5,152,784	)		—			(63,309,699	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(189,023,934	)		4,449,436			22,396,028			—			(162,178,470	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		192,679,301			5,923,478			2,791,253			—			201,394,032
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	3,655,367		$	10,372,914		$	25,187,281		$	—		$	39,215,562

105

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Statement of Cash Flows

Year Ended December 31, 2004

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	66,521,728		$	149,616,538		$	286,780		$	(149,903,318	)	$	66,521,728
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,162,151			53,635,890			496,082			—			57,294,123
Asset impairment expense		—			1,708,654			—			—			1,708,654
Deferred tax provision (benefit)		(3,937,176	)		—			—			—			(3,937,176	)
Deferred rent and other charges (income), net		1,108,145			1,611,326			—			—			2,719,471
Stock-based compensation expense		432,080			—			—			—			432,080
Financing prepayment expenses		16,649,009			—			—			—			16,649,009
Change in assets and liabilities, net and other, net of acquisitions		(137,439,971	)		(65,754,095	)		23,515,741			149,903,318			(29,775,007	)
Total adjustments		(120,025,762	)		(8,798,225	)		24,011,823			149,903,318			45,091,154
Net cash provided (used) by operating activities		(53,504,034	)		140,818,313			24,298,603			—			111,612,882
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and/or transfers		52,291,808			(141,495,080	)		(21,467,099	)		—			(110,670,371	)
Proceeds from disposition of property and equipment		3,925,733			2,170,000			—			—			6,095,733
Business acquisitions, net of cash acquired		(12,930,565	)		—			—			—			(12,930,565	)
Net cash provided (used) in investing activities		43,286,976			(139,325,080	)		(21,467,099	)		—			(117,505,203	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common stock for treasury		(62,780,817	)		—			—			—			(62,780,817	)
Proceeds from exercise of stock options		1,349,771			—			—			—			1,349,771
Proceeds from debt issuance		575,495,000			—			—			—			575,495,000
Payments of debt and related expenses, net		(215,040,833	)		—			(164,683	)		—			(215,205,516	)
Proceeds from credit facility		185,000,000			—			—			—			185,000,000
Payments on credit facility		(307,000,000	)		—			—			—			(307,000,000	)
Dividends paid		(4,783,404	)		—			—			—			(4,783,404	)
Net cash provided (used) in financing activities		172,239,717			—			(164,683	)		—			172,075,034
NET INCREASE IN CASH AND CASH EQUIVALENTS		162,022,659			1,493,233			2,666,821			—			166,182,713
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		30,656,642			4,430,245			124,432			—			35,211,319
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	192,679,301		$	5,923,478		$	2,791,253		$	—		$	201,394,032

106

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.  CERTAIN TRANSACTIONS

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

In 1999, we entered into a ground lease with 610 Loop Venture, LLC, a company wholly owned by our Chairman and Chief Executive Officer, on land owned by the us adjacent to our corporate headquarters. Under the terms of the ground lease, 610 Loop Venture pays us 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 2004, the ground lease was extended for a 5 year term.

In 2002, we 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 2006, 2005 and 2004, we paid base and percentage rent aggregating $567,000, $507,000 and $514,000, respectively.

As permitted by the employment contract between us and the Chief Executive Officer, charitable contributions were made by us to a charitable Foundation that the Chief Executive Officer served as Trustee in the amount of $91,000, $135,000, and $146,000 in 2006, 2005, and 2004, respectively. The contributions were made in addition to the normal salary and bonus permitted under the employment contract.

We, on a routine basis, hold or host promotional events, training seminars and conferences for our personnel. In connection therewith, we incurred in 2006, 2005 and 2004 expenses in the amount of $50,000, $279,000 and $68,000, respectively, at resort hotel properties owned by our Chief Executive Officer and managed by us.

Landry’s and Fertitta Hospitality jointly sponsored events and promotional activities in 2006, 2005 and 2004 which resulted in shared costs and use of our 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 than might have been obtained from unaffiliated third parties.

107

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15.  QUARTERLY FINANCIAL DATA (UNAUDITED)

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

	March 31, 2006		June 30, 2006		September 30, 2006			December 31, 2006
Quarter Ended:
Revenues	$	272,653,110	$	295,792,344	$	290,168,428		$	275,687,265
Cost of revenues		60,910,475		68,099,629		67,784,194			62,200,241
Operating income		25,236,505		33,571,023		13,559,591			14,696,648
Net income (loss)		6,952,294		9,592,651		(29,949,673	)		(8,364,995	)
Net income (loss) per share (basic)	$	0.33	$	0.45	$	(1.40	)	$	(0.39	)
Net income (loss) per share (diluted)	$	0.32	$	0.43	$	(1.36	)	$	(0.38	)
	March 31, 2005		June 30, 2005		September 30, 2005			December 31, 2005
Quarter Ended:
Revenues	$	193,751,098	$	222,629,828	$	219,900,145		$	261,178,442
Cost of revenues		54,225,209		61,143,399		59,169,488			59,052,833
Operating income		11,994,421		22,211,281		19,627,386			21,387,462
Net income		7,377,525		17,542,808		15,977,550			3,917,153
Net income per share (basic)	$	0.30	$	0.80	$	0.75		$	0.18
Net income per share (diluted)	$	0.29	$	0.78	$	0.73		$	0.18

As disclosed in Note 3, we initiated a plan to divest certain restaurants including 136 Joe’s Crab Shack units in the third quarter of 2006. The results of operations for all units included in the disposal plan have been reclassified as discontinued operations for all periods presented. Asset impairment and related expenses of $0.9 million, $8.8 million, $67.1 million and $7.0 million were recorded during the quarters ended March 31, 2006, June 30, 2006, September 30, 2006 and December 31, 2006, respectively. As disclosed in Note 2, we recorded a charge for additional stock compensation expense in the fourth quarter of 2006. We acquired the Golden Nugget Hotels and Casinos in the third quarter of 2005. As further described in Note 9, we adopted FAS 123R in 2006. Therefore, the 2006 quarterly results are not comparable with those of 2005.

16.  SUBSEQUENT EVENTS

On July 24, 2007, we were notified by the Trustee under the Indenture covering our $400.0 million 7.50% Senior Notes (“Notes”), that as a result of not filing with the SEC and delivering to the Trustee our Form 10-K for the year ended December 31, 2006 within the time frame set forth in the rules and regulations of the SEC, and upon direction of a majority of the Note Holders, it declared the unpaid principal and interest due and payable immediately. We believe the acceleration is inappropriate and have obtained a Temporary Restraining Order from the U.S. Federal District Court sitting in Galveston County, Texas. Upon the acceleration of the Notes, the existing waiver related to timely filing of our financial statements under our $450.0 million Credit Agreement expired. Notwithstanding the waiver expiration, the $97.0 million outstanding under the Credit Agreement has not been accelerated, nor do we expect such event to occur. Furthermore, as we currently have over $100.0 million in available cash on hand, we have not requested any further waivers under the Credit Agreement although we are unable to draw any additional funds. We are pursuing a permanent injunction enjoining the Trustee from accelerating the bonds, a waiver from the Note Holders and alternative financing options. If we are unsuccessful in obtaining a permanent injunction, we will implement the most favorable alternative, although either solution will likely result in increased borrowing costs. Nevertheless, on August 8, 2007, the Company completed an amendment and waiver of its existing Senior Credit Facility and obtained committed financing sufficient to repay its Senior Notes should it be unsuccessful in obtaining permanent recession of the acceleration.

108

LANDRY’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In June 2007, our wholly owned unrestricted subsidiary, Golden Nugget, Inc. completed a new $545.0 million credit facility consisting of a $330.0 million first lien term loan, a $50.0 million revolving credit facility, and a $165.0 million second lien term loan. The $330.0 million first lien term loan includes a $120.0 million delayed draw component to finance the continued renovation and expansion of the Golden Nugget Hotel and Casino in Las Vegas, Nevada.

The revolving credit facility expires on June 30, 2013 and the first lien term loan matures on June 30, 2014. Both the first lien term loan and the revolving credit facility bear interest at Libor, or the bank’s base rate, plus a financing spread, 2.0% or 0.75%, respectively, at June 30, 2007. In addition, the credit facility requires a commitment fee on the unfunded portion for both the $50.0 million revolving credit facility and the $120.0 million delayed draw component of the first lien term loan. The second lien term loan matures on December 31, 2014 and bears interest at Libor or the bank’s base rate, plus a financing spread, 3.25% or 2.0%, respectively, at June 30, 2007. The financing spreads and commitment fees on the revolving credit facility increase or decrease depending on the leverage ratio as defined in the credit facility. The first lien term loan requires one percent of the outstanding principal balance due annually to be paid in equal quarterly installments commencing on September 30, 2009 with the balance due on maturity. Principal of the second lien term loan is due at maturity.

The Golden Nugget’s subsidiaries have granted liens on substantially all real property and personal property as collateral under the credit facility and are guarantors of the credit facility. The proceeds from the credit facility were used to repay all of the Golden Nugget’s outstanding debt, including its 8.75% senior secured notes due December 2011, plus an outstanding balance of approximately $10.0 million on its former $43.0 million revolving credit facility. In addition, the proceeds were used to pay a dividend to one of our unrestricted subsidiaries of $187.5 million, associated tender premiums of approximately $8.8 million due to the early redemption of the 8.75% senior secured notes due December 2011, plus accrued interest and related transaction fees and expenses.

109

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 August, 2007.

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, Rick Liem 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 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)	August 9, 2007
/s/    Rick H. Liem         Rick H. Liem	Senior Vice President, Chief Financial Officer (Principal Financial Officer)	August 9, 2007
/s/    Steven L. Scheinthal         Steven L. Scheinthal	Executive Vice President, Secretary, General Counsel and Director	August 9, 2007
/s/    Michael S. Chadwick         Michael S. Chadwick	Director	August 9, 2007
/s/    Michael Richmond         Michael Richmond	Director	August 9, 2007
/s/    Joe Max Taylor         Joe Max Taylor	Director	August 9, 2007
/s/    Kenneth Brimmer         Kenneth Brimmer	Director	August 9, 2007

110

EXHIBIT INDEX

Exhibit No.	Exhibit
2.1	Stock Purchase Agreement dated February 3, 2005 between Landry’s Restaurants, Inc. and Poster Financial Group, Inc. regarding the acquisition of Golden Nugget Casino. (incorporated by reference to Exhibit 2.1 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
3.1	Certificate of Incorporation of Landry’s Seafood Restaurants, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
3.2	Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
3.3	Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.3 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
3.4	Bylaws of Landry’s Restaurants, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
3.5	Amendment to Bylaws (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2004, File No. 001-15531).
10.1	1993 Stock Option Plan (“Plan”) (incorporated by reference to Exhibit 10.60 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.2	Form of Incentive Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.61 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.3	Form of Non-Qualified Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.62 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.4	Non-Qualified Formula Stock Option Plan for Non-Employee Directors (“Directors’ Plan”) (incorporated by reference to Exhibit 10.63 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.5	First Amendment to Non-Qualified Formula Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit C of the Company’s Proxy Statement, filed on May 8, 1995, File No. 000-22150).
10.6	Form of Stock Option Agreement for Directors’ Plan (incorporated by reference to Exhibit 10.64 of the Company’s Registration Statement of Form S-1, filed on July 2, 1993, File No. 33-65498).
10.7	1995 Flexible Incentive Plan (incorporated by reference to Exhibit B of the Company’s Proxy Statement, filed May 8, 1995, File No. 000-22150).
10.8	2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 of the Company’s Form 10-K for the year ended December 31, 2003, filed March 9, 2004, File No. 001-15531).
10.9	Form of Stock Option Agreement between Landry’s Seafood Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.11 of the Company’s Form 10-K for the year ended December 31, 1995, File No. 000-22150).
10.10	Purchase Agreement dated December 15, 2004 between the Company and the initial purchasers. (incorporated by reference to Exhibit 10.10 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.11	Indenture Agreement dated as of December 28, 2004 by and among the Company, the Guarantors and Wachovia Securities, National Association (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).

111

Exhibit No.	Exhibit
10.12	Registration Rights Agreement date as of December 28, 2004 by and among the Company, the Guarantors and the initial purchasers party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.13	Credit Agreement dated as of December 28, 2004 by and among the Company, Wachovia Bank, National Association, and the other financial institutions party thereto (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.14	Security Agreement dated as of December 28, 2004 by and among the Company, the additional grantors named therein and Wachovia Bank, National Association (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.15	Guaranty Agreement dated as of December 28, 2004 between the Company and the Guarantors (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
10.16	Employment Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2003, filed August 12, 2003, File No. 001-15531).
10.17	Landry’s Restaurants, Inc. 2002 Employee/Rainforest Conversion Plan (incorporated by reference to Exhibit 99.1 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.18	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.2 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.19	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.3 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.2	Landry’s Restaurants, Inc. 2002 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.5 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.21	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.6 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.22	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.7 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.23	Landry’s Restaurants, Inc. 2001 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.9 of the Company’s Form S-8, filed March 31, 2003, File No. 333-104175).
10.24	Form of Management Agreement between Landry’s Management, L.P. and Fertitta Hospitality (incorporated by reference to Exhibit 10.34 of the Company’s Form 10-K for the year ended December 31, 2003, File No. 001-15531).
10.25	Ground Lease between Landry’s Management, L.P. and 610 Loop Venture, L.L.C. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 1999, File No. 000-22150).
10.26	Amendment to Ground Lease between Landry’s Management, L.P. and 610 Loop Venture, L.L.C. (incorporated by reference to Exhibit 10.26 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.27	Second Amendment to Contract of Sale and Development Agreement between Landry’s Management, L.P. and 610 Loop Venture, LLC (incorporated by reference to Exhibit 10.27 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)

112

Exhibit No.	Exhibit
10.28	Form of Landry’s Restaurants, Inc. Nonqualified Stock Option Agreement for use in Landry’s Restaurants, Inc. 2001 Individual Stock Option Agreements (incorporated by reference to Exhibit 99.10 of the Company’s Form S-8, filed on March 31, 2003, File No. 333-104175).
10.29	Lease Agreement dated December 1, 2001 between Rainforest Cafe, Inc. and Fertitta Hospitality, LLC (incorporated by reference to Exhibit 10.29 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.30	Form of Restricted Stock Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K for the year ended December 31, 2004, File No. 000-22150)
10.31	First Amendment to Personal Service and Employment Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit of the Company’s 10-K for the year ended December 31, 2005)
10.32	Restricted Stock Agreement between Landry’s Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit of the Company’s 10-K for the year ended December 31, 2005)
*10.33	T-Rex Cafe, Inc. Stockholders’ Agreement
*10.34	Stock Purchase Agreement By and Among JCS Holdings, LLC, LSRI Holdings, Inc. and Landry’s Restaurants, Inc.
*12.1	Ratio of Earnings to Fixed Charges
14	Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s Form 10-K for the year ended December 31, 2003)
*21	Subsidiaries of Landry’s Restaurants, Inc.
*23.1	Consent of Grant Thornton LLP
*31.1	Certification of Chief Executive Officer pursuant to rule 13(a)-14(a)
*31.2	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)
*32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to rule 13(a)-14(a)

* filed herewith

113

EX-10.33

Exhibit 10.33

T-REX CAFE, INC.

STOCKHOLDERS’ AGREEMENT

DATED AS OF FEBRUARY 24, 2006

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		1
1.01	Definitions	1
ARTICLE II CAPITAL CONTRIBUTIONS		6
2.01	SCI’s Contributions	6
2.02	Landry’s Contributions	7
2.03	Cost Overruns	8
2.04	Management Agreement	8
2.05	Issuance of Shares and other Consideration	9
2.06	Effect of Failure To Make Contributions	9
2.07	Landry’s Guarantee	9
2.08	Interest on Capital Contributions	9
ARTICLE III PAYMENTS TO SCI		9
3.01	Ancillary Payments	9
3.02	Royalty Fee	10
3.03	Research and Development Budget	10
3.04	Fourth Restaurant	10
3.05	Additional Restaurant	10
ARTICLE IV BUSINESS OPPORTUNITIES		11
4.01	General	11
4.02	Restricted Business/Non-competition Agreement	11
4.03	Restaurant Right of First Refusal	11
4.04	Exceptions to Non-competition Agreement	11
4.05	Procedures	11
4.06	Scope of Prohibition	12
4.07	Enforcement	12
ARTICLE V MANAGEMENT		12
5.01	Board of Directors	12
5.02	Executive Committee	13
5.03	Related Party Agreements	13
5.04	Corporate Expenses	13
ARTICLE VI SCI’S PUT OPTION		15
6.01	Put Option in Favor of SCI	15
6.02	Purchase Price	15
6.03	Exercise Notice	15
6.04	Answering Notice	15
6.05	Responding Notice	15
6.06	Resolution of Disputed Value	15
6.07	Payment of Purchase Price	16
6.08	Notice to Disney	16

i

TABLE OF CONTENTS

(continued)

		Page
ARTICLE VII LANDRY’S CALL OPTION		16
7.01	Call Options in Favor of Landry’s	16
7.02	Exercise Notice	17
7.03	Notice to Disney	17
ARTICLE VIII REPRESENTATIONS AND WARRANTIES		17
8.01	Representations and Warranties	17
8.02	Closing Certificates	18
ARTICLE IX CONFIDENTIALITY		18
9.01	Confidential Information	18
9.02	Return or Destruction of Confidential Information	18
9.03	Legally Required Disclosures	18
9.04	Remedies	19
ARTICLE X TERM AND TERMINATION		19
10.01	Date of Termination	19
10.02	Effect of Termination	19
ARTICLE XI INDEMNIFICATION		19
11.01	Indemnification by SCI	19
11.02	Indemnity for Excluded Liabilities	20
11.03	Indemnity by Company	20
ARTICLE XII DISPUTE RESOLUTION		20
12.01	Arbitration of Claims	20
12.02	Finality of Award	21
12.03	Applicable Law	21
12.04	Waiver of Immunity	21
12.05	Notice	21
12.06	Payment	21
12.07	Expenses	22
12.08	Arbitral Ruling	22
12.09	Specific Performance	22
ARTICLE XIII MISCELLANEOUS PROVISIONS		22
13.01	Notice	22
13.02	Survival	23
13.03	Authority	23
13.04	Limitation on Liability	23
13.05	Binding Nature and Assignment	23
13.06	Transfer of Stock and Joinder	24
13.07	Performance by Landry’s Affiliates	24
13.08	Force Majeure	24
13.09	Publicity; Confidentiality	24
13.10	No Implied Licenses	24
13.11	Amendment; Waiver	25

ii

TABLE OF CONTENTS

(continued)

		Page
13.12	Severability	25
13.13	Governing Law; Jurisdiction	25
13.14	Headings	25
13.15	Counterparts	25
13.16	Entire Agreement	25

Schedule I –	Asia Assets
Schedule II –	T-Rex Assets
Schedule III –	Assets on Consignment
Schedule IV –	SCI Intellectual Property
Schedule V –	Payables and Notes
Schedule VI –	Cost Cap
Exhibit A –	Contribution Agreement
Exhibit B –	Escrow Agreement
Exhibit C –	Management Agreement
Exhibit D –	Form of Consulting Agreement

iii

STOCKHOLDERS’ AGREEMENT

This STOCKHOLDERS’ AGREEMENT (this “Agreement”) is entered into effective as of the 24th day of February, 2006 (the “Effective Date”) by and among T-Rex Cafe, Inc., a Delaware corporation (the “Company”), LCHLN, Inc., a Delaware corporation (“Landry’s”), and Schussler Creative, Inc., a Minnesota corporation (“SCI”). Landry’s Restaurants, Inc., a Delaware corporation, shall be a party to this Agreement solely in connection with its obligations set forth in Section 2.07.

RECITALS

WHEREAS, SCI has created and owns free and clear two new restaurant concepts known as “T-Rex” and “Asia”;

WHEREAS, Landry’s desires to arrange financing for the construction of and to manage the construction and operation of at least four T-Rex restaurants or Asia restaurants which shall contain restaurant and retail operations (the “T-Rex/Asia Restaurants”);

WHEREAS, SCI and Landry’s contemporaneously with the Closing (as hereinafter defined) shall each make capital contributions to the Company as described herein for the purpose of developing the T-Rex/Asia Restaurants; and

WHEREAS, the Company and the Stockholders (as hereinafter defined) desire to enter into this Agreement to set forth certain agreements by and among the parties hereto with respect to (i) the management and governance of the Company and (ii) the rights of each Stockholder;

NOW, THEREFORE, for and in consideration of the promises and faithful performance of the mutual covenants hereinafter recited, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties (as hereinafter defined) hereby agree as follows:

ARTICLE I

DEFINITIONS

1.01 Definitions. Capitalized terms used in this Agreement have the meanings specified in (i) the introductory paragraph, (ii) the recitals, or (iii) this Article I, as the case may be.

“AAA” has the meaning set forth in Section 12.01.

“Act” means the Delaware General Corporate Law, as amended from time to time.

“Agreed Value” of any property at a particular time means the Fair Market Value of such property at the time as determined by the Executive Committee.

“Agreement has the meaning set forth in the introductory paragraph.

“Ancillary Payments” has the meaning set forth in Section 3.01.

“Answering Notice” has the meaning set forth in Section 6.04.

“Arbitration Award” has the meaning set forth in Section 12.02.

“Arbitration Notice” has the meaning set forth in Section 12.01.

“Asia Assets” means the assets set forth on Schedule I.

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

“Capital Stock” means, with respect to: (i) any corporation, any share, or any depositary receipt or other certificate representing any share, of an equity ownership interest in that corporation and (ii) any other Person, any share, membership or other percentage interest, unit of participation or other equivalent (however designated) of an equity interest in that Person.

“Certificate” means the Certificate of Incorporation relating to the Company filed in the office of the Secretary of State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act.

“Change in Control” means, with respect to SCI, any of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of SCI’s assets to any other Person, unless immediately following such sale, lease, exchange or other transfer such assets are owned, directly or indirectly, by SCI; (ii) the consolidation or merger of SCI with or into another Person pursuant to a transaction in which the outstanding voting capital stock of SCI are changed into or exchanged for cash, securities or other property, other than any such transaction where (a) the outstanding voting capital stock of SCI are changed into or exchanged for voting capital stock of the surviving corporation or its parent and (b) the holders of the voting capital stock of SCI immediately prior to such transaction own, directly or indirectly, not less than a majority of the outstanding voting capital stock of the surviving corporation or its parent immediately after such transaction; and (iii) a “person” or “group” (within the meaning of Sections 13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) being or becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended) of more than 50% of all of the then outstanding voting capital stock of SCI, except in a merger or consolidation which would not constitute a Change in Control under clause (ii) above.

“Claim” has the meaning set forth in Section 11.01(a).

“Closing” means the consummation of the transactions contemplated in this Agreement which shall take place no earlier than the date in which the Closing Conditions have been fulfilled at a location and a time mutually agreed upon by the Parties.

“Closing Conditions” means (i) SCI has obtained a settlement and release agreement from Levy Restaurants in form and substance satisfactory to Landry’s that provides for the assignment of all trademarks and copyrights, if any, associated with any menus developed for the T-Rex/Asia Restaurants and a full and final release of SCI and its successors and assigns from all

2

liability to Levy Restaurants and affiliates; and (ii) the Company or any affiliate thereof shall have entered into two lease agreements with Walt Disney World Hospitality & Recreation Company in form and substance satisfactory to Landry’s for the Disney “T-Rex” restaurant and the Disney “Asia” restaurant.

“Closing Date” means the date on which the Closing occurs.

“Commercial Arbitration Rules” has the meaning set forth in Section 12.01.

“Common Stock” means the common stock, par value $0.01 per share, of the Company.

“Company” has the meaning set forth in the recitals.

“Confidential Information” means (a) all information and documents that any Providing Party furnishes or otherwise discloses to any Recipient Party, including, without limitation, information or documents of the Providing Party or any affiliate of the Providing Party relating to (i) the business, production, processes and services of such Parties, (ii) research and development, (iii) inventions and ideas, (iv) software (including object code and source code), (v) products under development, (vi) business plans, (vii) market studies, (viii) purchasing, accounting, engineering, marketing, merchandising, pricing and sales, (ix) information technology, and (x) employees or customers, including employee and customer lists, and (b) all notes, analyses, compilations, studies, interpretations or other documents, records or data (in whatever form maintained, whether documentary, electronic or otherwise) prepared by a Recipient Party, which contain or otherwise reflect or are generated from such information or documents. The term “Confidential Information” does not include information (w) received from a third party not employed by or affiliated with the Providing Party, provided that the source of such information is not known by the Recipient Party to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the Providing Party or any other party with respect to such information; (x) which is or becomes known to the public other than through a breach of this Agreement; (y) which was within the Recipient Party’s possession prior to its being furnished to the Recipient Party by the Providing Party pursuant to this Agreement, provided that the source of such information was not known to the Recipient Party to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the Providing Party or any other party with respect to such information; or (z) independently developed by the Recipient Party without reference to the Confidential Information, provided that such independent development can reasonably be proven by the Recipient Party through a written record.

“Contributed Assets” has the meaning set forth in Section 2.01(a).

“Contribution Payment” has the meaning set forth in Section 2.05(a).

“Corporate Expenses” has the meaning set forth in Section 5.04.

“Cost Cap” initially means the amount described and computed on Schedule VI hereto, which consists of the capital expenditures required by the Company to open the three T-Rex/Asia Restaurants described on Schedule VI, plus $1,000,000 per T-Rex/Asia Restaurant for pre-opening expenses, plus a cost overrun of twenty percent (20%). The Cost Cap shall be

3

recomputed in the event the parties agree to substitute a new location for one described on Schedule VI, and at such time, the parties shall agree to the new approximate capital expenditures required to open such T-Rex/Asia Restaurant and shall replace Schedule VI with a new schedule reflecting such changes.

“Disney” means The Walt Disney Company and its affiliates including Disney World Hospitality & Recreation Company.

“Disney Restaurants” has the meaning set forth in Section 6.01.

“Disney T-Rex Cap Ex Amount” has the meaning set forth in Section 2.02(c).

“Effective Date” has the meaning set forth in the introductory paragraph.

“Escrow Agreement” has the meaning set forth in Section 2.02(b).

“Excluded Liabilities” means any and all liabilities or obligations of any kind whatsoever, known or unknown which may exist or which may arise hereafter against SCI or any of its affiliates or Steven Schussler, other than those liabilities or obligations specifically set forth on Schedule III or Schedule V hereto and Section 11.03.

“Executive Committee” has the meaning set forth in Section 5.02(a).

“Exercise Notice” has the meaning set forth in Section 6.03.

“Fair Market Value” of an item of property means the amount of cash a willing buyer would pay a willing seller for that property at that time in an arm’s length transaction.

“First Arbitrator has the meaning set forth in Section 12.01.

“Gross Revenue” means all revenue derived from any source directly or indirectly by the Company.

“Intellectual Property” means any and all U.S. and foreign intellectual property, including patent applications, patents and any reissues or reexaminations thereof, copyright registrations, copyrights (including copyrights in computer programs, software, computer code, documentation, drawings, specifications and data), moral rights of authorship, rights in designs, trade secrets, tradedress, technology, inventions, discoveries, improvements, know-how, proprietary rights, formulae, processes, methods, technical information, confidential and proprietary information, and all other intellectual property rights.

“Landry’s” has the meaning set forth in the introductory paragraph.

“Landry’s First Call Option” has the meaning set forth in Section 7.01.

“Landry’s Second Call Option” has the meaning set forth in Section 7.01.

“Management Fee” has the meaning set forth in Section 2.04.

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“Party” or “Parties” means the Company, SCI and Landry’s as parties to this Agreement.

“Person” means any natural person, corporation, limited liability company, joint stock company, joint venture, partnership, unincorporated association, governmental authority or other entity.

“Providing Party” means any Party providing Confidential Information under this Agreement.

“Recipient Party” means any Party receiving Confidential Information under this Agreement, including such Party’s Representatives.

“Representatives” means any director, officer, employee, representative, common-law agent, attorney, consultant, accountant, financial or other advisor, or bank or other financing source of or to a Person.

“Responding Notice” has the meaning set forth in Section 6.05.

“Restaurant Level Profit” means the profit before federal income taxes on the combined income statements of all the T-Rex/Asia Restaurants of the Company as adjusted such that the expenses shall specifically include the:

(i) Royalty Fee paid to SCI;

(ii) Research and development payments paid to SCI pursuant to the terms of Section 3.03;

(iii) Management Fee paid to Landry’s;

(iv) Interest expense; which shall be the lesser of the actual interest expense incurred and $1 million in any Trailing Twelve Month Period; and

(v) other expenses of the T-Rex/Asia Restaurants;

but the expenses shall NOT include:

(a) allocation of Landry’s corporate expenses; provided, however, if such corporate expenses are third party expenses with a non-affiliate and are incurred on behalf of an individual T-Rex/Asia Restaurant based upon the Executive Committee’s good faith determination that such expenses are more economical if purchased at the corporate level in conjunction with other Landry’s restaurants, then such expenses shall be allocated on a reasonable pro-rata basis to the Company and included as an adjustment to Restaurant Level Profit, e.g. property and casualty insurance and health insurance for employees;

(b) the pre-opening expenses paid by Landry’s pursuant to the terms of Section 2.02(e); or

(c) depreciation.

“Restricted Business” has the meaning set forth in Section 4.02.

“Restricted Business ROFR” has the meaning set forth in Section 4.02.

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“Royalty Fee” has the meaning set forth in Section 3.02.

“SCI” has the meaning set forth in the introductory paragraph.

“SCI Intellectual Property” means all of the Intellectual Property of SCI relating to the “T-Rex” and “Asia” concepts that is in existence on the date of this Agreement, including, without limitation, those items set forth on Schedule IV hereto.

“SCI’s Key Employee” means Steven Schussler.

“SCI’s Put Option” has the meaning set forth in Section 6.01.

“Second Arbitrator has the meaning set forth in Section 12.01.

“Stockholder” means either Landry’s or SCI, and “Stockholders” means Landry’s and SCI and their permitted transferees.

“T-Rex Assets” means the assets set forth on Schedule II.

“T-Rex/Asia Restaurants” has the meaning set forth in the Recitals.

“Third Arbitrator has the meaning set forth in Section 12.01.

“Trailing Twelve-Month Period” means, as to the effective date of the calculation hereunder, which shall be the date of the Exercise Notice, the twelve-calendar-month period ending on the last day of the most recent calendar month that is at least one complete calendar month prior to the Exercise Notice; for example, the Trailing Twelve-Month Period for an effective date of June 6 would be the twelve months ending on the prior April 30; for an effective date of December 1 would be the twelve months ending on the prior October 31; and for an effective date of March 31 would be the twelve months ending on the prior January 31.

“Transfer” shall mean and include any direct or indirect offer for sale, sale, assignment, transfer, pledge, encumbrance, or other disposition of, or the subjecting to a security interest of, any Capital Stock or any disposition of any Capital Stock or of any interest therein which would constitute a sale thereof within the meaning of the Securities Act.

ARTICLE II

CAPITAL CONTRIBUTIONS

2.01 SCI’s Contributions.

(a) Contribution Agreement. On the Closing Date, SCI agrees to enter into the Contribution Agreement in substantially the form attached hereto as Exhibit A wherein it shall irrevocably assign, sell, convey, and transfer to the Company all right, title, and interest in and to the (i) T-Rex Assets, (ii) the Asia Assets, (iii) the assets on consignment set forth on Schedule III hereto and (iii) the SCI Intellectual Property, including, without limitation, the items set forth on Schedule IV hereto and all causes of action (including the right to seek damages for the past or future infringement of any Intellectual Property that accrues in favor of SCI) (such assets collectively referred to herein as the “Contributed Assets”).

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(b) Further Assurances. From time to time, upon Landry’s or the Company’s request, SCI shall take any and all steps necessary to execute, acknowledge, and deliver to the Company or Landry’s any and all further instruments and assurances necessary or expedient in order to invest all right, title, and interest in any aforementioned Contributed Assets in the Company and to facilitate the Company’s enjoyment, enforcement, and recordation of such rights.

2.02 Landry’s Contributions.

(a) Ancillary Payments to SCI. On the Closing Date, Landry’s shall contribute to the Company the amounts necessary for the Company to make (i) the Contribution Payment to SCI and (ii) the Ancillary Payments set forth in Section 3.01.

(b) Delivery of Leased Properties. On the Closing Date, Landry’s shall place One Million Dollars ($1,000,000) in an interest bearing escrow account pending delivery of the property to the Company or its affiliate under the two lease agreements between the Company or its affiliate and Disney. The money placed in the escrow account shall be released from escrow and paid to SCI only in accordance with the terms and conditions set forth in the Escrow Agreement in substantially the form attached hereto as Exhibit B (the “Escrow Agreement”).

(c) Development of the T-Rex/Asia Restaurants. Landry’s agrees to contribute to the Company the amounts necessary to fund and/or guarantee the financing for the construction of at least four T-Rex/Asia Restaurants based upon the anticipated capital expenditures in the amounts described below:

Location	Approximate Capital Expenditure
Kansas City “T-Rex” Kansas City, Missouri	$2 million
Disney “T-Rex” Disney World, Orlando, Florida	$26.7 million (the “Disney T-Rex Cap Ex Amount”)
Disney “Asia” Disney World, Orlando, Florida	$10 million
Mohegan Sun “T-Rex” Connecticut	$5 million

or such other locations or anticipated capital expenditures as mutually agreed to by the Stockholders. The Parties acknowledge that the funding of the capital expenditures described above may occur over a four year period following the Closing Date, depending on a number of factors, including, without limitation, the execution of the necessary leases, the delivery of

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possession of the real property with respect to such leases and required opening dates under such leases. To the extent that any invoice set forth on Schedule V-B hereto is reduced after the Closing Date, the Disney T-Rex Cap Ex Amount shall be increased on a dollar for dollar basis.

(d) Assets on Consignment. Landry’s agrees to contribute to the Company the amounts necessary to fund the acquisition by the Company of the Contributed Assets that are on consignment or not yet paid for, as set forth on Schedule III hereto, provided that with respect to the items set forth on Schedule III hereto, Landry’s shall not be obligated to contribute to the Company any amount in excess of $300,000. In the event that the acquisition by the Company of the items set forth on Schedule III requires the Company to pay any amount in excess of $300,000 (an “Excess Amount”), SCI agrees to contribute to the Company an amount equal to such Excess Amount.

(e) Pre-Opening Costs of Each Location. Landry’s shall fund and/or guarantee the financing of the pre-opening costs associated with each of the grand openings of four T-Rex/Asia Restaurants.

The capital contributions described in paragraphs (b), (c), (d) and (e) above shall be made by Landry’s following the happening of the event that gives rise to such contribution as necessary for the Company to timely fulfill its obligations in connection therewith.

2.03 Cost Overruns.

(a) If the aggregate of all construction and pre-opening costs associated with the opening of Kansas City “T-Rex,” Disney “Asia” and Mohegan Sun “T-Rex” exceeds the amount of the Cost Cap, then (i) SCI shall pay 20% of the amount that exceeds the Cost Cap to the Company in the form of an additional capital contribution and (ii) Landry’s shall pay 80% of the amount that exceeds the Cost Cap to the Company in the form of an additional capital contribution.

(b) If the aggregate of all construction costs associated with the opening of Disney “T-Rex” exceeds the Disney T-Rex Cap Ex Amount, then each of SCI and Landry’s shall pay 50% of the amount that exceeds the Disney T-Rex Cap Ex Amount to the Company in the form of an additional capital contribution.

(c) If the aggregate of all pre-opening costs associated with the opening of Disney “T-Rex” exceeds $1,200,000, then (i) SCI shall pay 20% of the amount that exceeds $1,200,000 to the Company in the form of an additional capital contribution and (ii) Landry’s shall pay 80% of the amount that exceeds $1,200,000 to the Company in the form of an additional capital contribution.

2.04 Management Agreement. On the Closing Date, the Company shall enter into a Management Agreement with Landry’s Restaurants, Inc. or one of its affiliates in substantially the form attached hereto as Exhibit C pursuant to which Landry’s Restaurants, Inc. or such affiliate(s) will provide all the management and other necessary skill to construct, operate and manage each T-Rex/Asia Restaurant after the Closing Date in exchange for a four percent (4%) management fee on all Gross Revenue of the Company (the “Management Fee”).

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2.05 Issuance of Shares and other Consideration.

(a) SCI. On the Closing Date, the Company (i) shall issue to SCI twenty (20) shares of Common Stock and (ii) make a cash payment to SCI in an amount equal to Three Million Dollars ($3,000,000) (the “Contribution Payment”).

(b) Landry’s. On the Closing Date, the Company shall issue to Landry’s eighty (80) shares of Common Stock.

2.06 Effect of Failure To Make Contributions.

(a) Except as provided in Section 2.06(b), if any Stockholder fails to make its contributions as provided herein at the time required hereby, then the other Stockholder shall have the right to enforce any and all remedies available at law or in equity, including but not limited to, rescinding this Agreement, seeking injunctive relief and/or recovering damages.

(b) In the event SCI fails to make additional capital contributions to cover any cost overrun as required by Section 2.03 or any Excess Amount as required by Section 2.02(d), then Landry’s shall loan SCI such amount by funding it to the Company and SCI shall be obligated to reimburse Landry’s for the amount of the additional capital contribution plus interest at a rate of 8% compounded annually. Landry’s shall, at its option, be able to offset any amounts due by reducing the purchase price under Landry’s First Call Option, Landry’s Second Call Option or the SCI Put Option, as the case may be.

2.07 Landry’s Guarantee. Landry’s Restaurants, Inc. agrees to make capital contributions to Landry’s at such times and in such amounts as will permit Landry’s to fulfill its obligations to make capital contributions to the Company, as set forth in Section 2.02.

2.08 Interest on Capital Contributions. No Party shall receive, or be entitled to receive, interest on its contributions to the capital of the Company.

ARTICLE III

PAYMENTS TO SCI

3.01 Ancillary Payments.

(a) The Company shall make a cash payment to SCI in an amount equal to One Million Dollars ($1,000,000) upon the later of (i) the Closing Date or (ii) the execution of two lease agreements between the Company or any affiliate thereof and Disney (one of which shall relate to Disney “T-Rex” and the other which shall relate to Disney “Asia,” each in form and substance satisfactory to Landry’s).

(b) On or within two weeks after the Closing Date, the Company shall pay directly to the third party creditors of SCI or any of its affiliates the amounts listed on Schedule V.

The payments that are made by the Company pursuant to this Section 3.01 are herein referred to as the “Ancillary Payments.”

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3.02 Royalty Fee. The Company will pay SCI a One Percent (1%) royalty fee each month on all Gross Revenue of the Company (the “Royalty Fee”). The royalty fee shall cease upon the earlier of (i) the exercise of Landry’s First Call Option or Landry’s Second Call Option by Landry’s, (ii) the exercise of the SCI Put Option by SCI or (iii) the dissolution of the Company pursuant to Article X.

3.03 Research and Development Budget. During the first year after the Closing Date, the Company will pay SCI One Million Dollars ($1,000,000) as a research and development payment to be used by SCI to cover general and administrative expenses of SCI (including all employee salaries and travel expenses). After the first year, the Company shall pay SCI (a) Two Hundred Fifty Thousand Dollars ($250,000) a year to cover the salary of SCI’s Key Employee and the Company shall reimburse separately the reasonable travel expenses (of approved travel documented in accordance with Landry’s travel reimbursement policies) of SCI’s Key Employee plus (b) the reasonable salary and travel expenses (of approved travel documented in accordance with Landry’s travel reimbursement policies) of any SCI employee, other than the SCI Key Employee, identified by the Executive Committee as necessary for the development of the T-Rex/Asia Restaurants; provided, however, that the payment of such salary and travel expenses is contingent on the fulfillment by such SCI employee of such terms and conditions as determined by the Executive Committee (in its sole discretion), including, without limitation, that such SCI employee may be required to relocate to Houston, Texas. Such salary and travel expenses shall cease to be paid, except to the SCI Key Employee, upon the opening of the Disney Restaurants. The research and development payment provided for in this Section 3.03 shall be paid monthly over a one-year period in an amount equal to the budget amount for the applicable year divided by twelve (12). These payments shall cease upon Landry’s exercise of Landry’s First Call Option or Landry’s Second Call Option, SCI’s exercise of SCI’s Put Option or the dissolution of the Company pursuant to Article X. In the event that Landry’s First Call Option, Landry’s Second Call Option or SCI’s Put Option is exercised prior to the fifth anniversary of the opening of the T-Rex Disney Restaurant in Orlando, Florida, the Company and SCI’s Key Employee shall enter into a Consulting Agreement, in the form attached hereto as Exhibit D, which shall provide, among other things, that SCI’s Key Employee shall (i) give the Company creative input and oversee the creative design aspects of the T-Rex/Asia Restaurants, (ii) review and consider all matters relating to proposed substantive changes to the concept of the T-Rex/Asia Restaurants and (iii) provide recommendations to the Board of Directors of the Company with respect to any substantive or material changes proposed to be made to the concept of the T-Rex/Asia Restaurants. In the event the Consulting Agreement is entered into as provided above, the Company shall give Disney notice of the execution and delivery of the Consulting Agreement at the address and in the manner provided for notice to be given under the terms of any existing lease agreement between the Company or any of its affiliates and Disney.

3.04 Fourth Restaurant. The Company will pay SCI an additional One Million Dollars ($1,000,000) upon the signing and subsequent opening of a fourth (4th) T-Rex/Asia Restaurant by the Company.

3.05 Additional Restaurant. After Landry’s exercises Landry’s First Call Option or Landry’s Second Call Option or SCI’s exercise of SCI’s Put Option, SCI will be paid Two Hundred Fifty Thousand Dollars ($250,000), for any new location developed and offered to the Company by SCI which results in the opening of a new restaurant location.

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ARTICLE IV

BUSINESS OPPORTUNITIES

4.01 General. For so long as SCI or any of its affiliates is an equity owner in the Company, the Parties agree that all T-Rex/Asia Restaurants and any other related business utilizing the “T-Rex” and “Asia” concepts anywhere in the world will be developed, constructed, marketed, operated and managed solely through the Company and that all ideas, creative concepts and any other Intellectual Property created by SCI or any of its affiliates that in any way relate to the T-Rex/Asia Restaurants, the T-Rex Assets or the Asia Assets shall be the property of the Company without requiring any additional payments or other compensation

4.02 Restricted Business/Non-competition Agreement. For so long as SCI or any of its affiliates is an equity owner in the Company and for a period of three (3) years thereafter, SCI and its affiliates shall be prohibited from competing with any of the T-Rex/Asia Restaurants by owning or operating a dinosaur-themed restaurant and shall be prohibited from owning, investing in, managing or being otherwise involved or associated with an operating themed restaurant or themed eatery of any kind within 30 miles of any opened T-Rex/Asia Restaurant or any T-Rex/Asia Restaurant which is in the planning stages on or prior to the date SCI ceases to be an equity owner (the “Restricted Business”).

4.03 Restaurant Right of First Refusal. For so long as SCI or any of its affiliates is an equity owner in the Company and for a period of three (3) years thereafter, any restaurant idea and any opportunity to develop a new restaurant concept created by SCI or any of its affiliates shall be first offered to Landry’s in accordance with the procedure set forth in Section 4.05.

4.04 Exceptions to Non-competition Agreement.

(a) Nothing in Section 4.02 shall in any way restrict or impair SCI’s or its affiliates’ ability to own, directly or indirectly, less than five (5%) percent of the outstanding voting securities of an entity that is listed on a national securities exchange or quoted on The Nasdaq Stock Market or is otherwise required to file periodic reports under the Exchange Act.

(b) If a restaurant which would otherwise be considered to be a Restricted Business is offered to Landry’s (the “Restricted Business ROFR”) in accordance with the procedures set forth in Section 4.05, and Landry’s elects not to pursue such restaurant, then SCI shall be free to pursue such specific restaurant at the specific location included in the Restricted Business ROFR and SCI shall no longer be subject to the non-competition agreement contained in Section 4.02 with respect to only that specific restaurant at the specified location; provided, however that such restaurant must be pursued within 270 days of the date of the notification that Landry’s elects not to pursue it under terms no more favorable than those offered to Landry’s or the restaurant must be reoffered to Landry’s in accordance with this Section 4.04(b).

4.05 Procedures. In the event that Landry’s is entitled to the right of first refusal provided in Section 4.03 or a Restricted Business ROFR, then as soon as practicable, SCI or its affiliate shall notify Landry’s of such restaurant opportunity or idea and deliver to Landry’s all

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relevant information prepared by or on behalf of SCI or any of its affiliates relating to such restaurant opportunity or idea, including, specifically, the proposed location for such restaurant. As soon as practicable but in any event within 45 days after receipt of such notification and information, Landry’s shall notify SCI that either (i) Landry’s has elected not to pursue the restaurant, or (ii) Landry’s has elected to pursue the restaurant on the terms provided in the notification. If, at any time, Landry’s abandons such restaurant, SCI or its affiliates may pursue such restaurant pursuant to terms no more favorable than those presented to Landry’s and only at the specific location presented to Landry’s. With respect to any restaurant which is permitted to be pursued by SCI or its affiliates in accordance with Section 4.04 and this Section 4.05, such restaurant must be pursued within 270 days of the date of the notification that Landry’s elects not to pursue it or the restaurant opportunity or idea must be reoffered to Landry’s in accordance with this Section 4.05.

4.06 Scope of Prohibition. Except as provided in this Article IV, SCI and its affiliates shall be free to engage in any business activity whatsoever, including those that may be in direct competition with Landry’s or the Company. Except as provided in Sections 4.01 and 4.05 nothing herein shall be deemed to prohibit Landry’s from developing competing concepts or competing restaurants.

4.07 Enforcement. The Parties agree and acknowledge that the Company does not have an adequate remedy at law for the breach by either of them of its covenants and agreements set forth in this Article IV, and that any breach of the covenants and agreements set forth in this Article IV would result in irreparable injury to the Company. The Parties further agree and acknowledge that the Company may, in addition to the other remedies which may be available to it, file a suit in equity to enjoin the Parties and their affiliates from such breach, and consent to the issuance of injunctive relief to enforce the provisions of Article IV of this Agreement.

ARTICLE V

MANAGEMENT

5.01 Board of Directors.

(a) Members. Each of SCI and Landry’s agrees that the Company’s Board of Directors shall consist of no more than four (4) members and the number of members on the Company’s Board of Directors shall at all times equal the number of persons which have been designated from time to time in accordance with this Section 5.01(a). If any Stockholder which has the right to designate a member of the Board of Directors in accordance with this Section 5.01(a) has not designated such member to the Company’s Board of Directors, each of the Parties agrees that such Stockholder may designate a member of the Board of Directors at any time, or from time to time. Until such time as any Stockholder which has the right to designate a member of the Board of Directors in accordance with this Section 5.01(a) has designated such member to the Company’s Board of Directors, the number of members on the Company’s Board of Directors shall be reduced by the number of members which have not yet been designated. Each of SCI and Landry’s further agrees Landry’s shall be entitled to designate three (3) directors who shall initially be Tilman J. Fertitta, Rick H. Liem, and Steven L. Scheinthal and SCI shall be entitled to designate one (1) director who shall initially be Steven Schussler; provided, however, that

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upon the exercise of (i) either Landry’s First Call Option or Landry’s Second Call Option or (ii) SCI’s Put Option, SCI’s designated director shall resign and SCI shall have no further rights pursuant to this Section 5.01(a).

(b) Removal. Subject to the fiduciary obligations of each member of the Board of Directors, only the Party who designated a director may remove such director.

(c) Vacancies. Any vacancy on the Board of Directors created by the resignation, removal, incapacity or death of any person designated under Section 5.01(a) shall be filled by another person designated and/or elected in a manner so as to preserve the constituency of the Board of Directors as provided above.

5.02 Executive Committee.

(a) Power. The Bylaws of the Company shall provide that there will be an Executive Committee of the Company’s Board of Directors (the “Executive Committee”) authorized to exercise all the powers and authority of the Board of Directors, subject to applicable law, to determine any and all terms and conditions of, and to approve, adopt, ratify and confirm any and all documentation and actions incidental to any obligation, action, transaction, payment, right or responsibility contemplated in this Agreement. Notwithstanding the foregoing, the Board of Directors shall take all actions required with respect to any proposed merger, consolidation or sale of all or substantially all of the assets of the Company or the sale of any equity interests in the Company.

(b) Members. The Executive Committee shall consist of not less than two (2) members of the Board of Directors. All members of the Executive Committee shall be designated by Landry’s.

(c) Report to Board. All formal actions of the Executive Committee shall be reported to the Board of Directors at or prior to the next regular meeting of the Board of Directors.

(d) Governance. The Executive Committee may adopt such other rules and regulations for calling and holding its meetings and for the transaction of business at such meetings as may be necessary or desirable and not inconsistent with the provisions of the Bylaws of the Company.

5.03 Related Party Agreements. Affiliates of the Company may deal and contract with the Company; provided, however, that all such contracts shall be on terms at least as favorable to the Company as any then being offered by qualified and competent non-affiliated, comparable entities or persons performing similar services.

5.04 Corporate Expenses. The Company shall be responsible for and shall pay all Corporate Expenses. All Corporate Expenses shall be paid out of funds of the Company determined by the Executive Committee in its good faith sole discretion to be available for such purpose. As used herein, “Corporate Expenses” means all fees, costs, expenses, open purchase orders, liabilities, charges, and other obligations incurred with respect to the conduct of the business of the business of the Company and its business and assets, as determined by the Executive Committee, and shall include, without limitation, the following:

(a) all fees and expenses of accountants, attorneys, consultants, engineers, brokers, and other professional advisors incurred by the Company, including out-of-pocket costs or expenses incurred by the Stockholders on behalf of the Company in connection with (i) maintaining, operating, and managing the Company and its business, (ii) initiating, investigating, evaluating, researching, negotiating, structuring and arranging transactions, business alliances and asset acquisitions by or of the Company (whether or not consummated), (iii) monitoring, managing, evaluating, restructuring, reorganizing, refinancing, or recapitalizing any Company asset or indebtedness and (iv) initiating, investigating, evaluating, researching, negotiating, structuring, arranging, and effectuating the disposition of, any Company asset (whether or not consummated);

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(b) all taxes, fees, and other governmental charges levied against the Company or its assets or business;

(c) all fees and expenses incurred in connection with the registration, qualification or exemption of the Company under any applicable federal, state, or local law;

(d) all fees and expenses relating to the preparation of the quarterly unaudited and annual unaudited financial statements of the Company (the “Unaudited Financial Statements”), the local, state and federal income, franchise and other tax returns of the Company, other regulatory reports and filings of the Company, and all other documents, opinions, appraisals and reports required to be delivered to the Stockholders pursuant to the provisions of this Agreement; provided, however, that if SCI requests that any of the Unaudited Financial Statements are audited and such an audit results in adjustments to net income of (i) more than 4%, then Landry’s shall pay for such audit or (ii) less than 4%, then SCI shall pay for such audit;

(e) all fees and expenses incurred in connection with any litigation, mediation, arbitration or other legal or tax proceeding involving the Company or any of its assets (including the cost of any investigation and preparation) and the amount of any judgment or settlement paid in connection therewith;

(f) all fees and expenses incurred in connection with the collection of amounts due to the Company;

(g) all fees and expenses incurred in connection with the dissolution and liquidation of the Company; and

(h) all costs and expenses incurred in connection with any obligations to provide indemnification or contribution to any indemnitee pursuant to Article XI, pursuant to any approval by the Executive Committee or as a matter of law.

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ARTICLE VI

SCI’S PUT OPTION

6.01 Put Option in Favor of SCI. SCI shall have the right to require Landry’s to purchase SCI’s Common Stock at anytime after at least three (3) of the T-Rex/Asia Restaurants have been open and operating for twenty-five (25) months; provided, however, with respect to any of the three (3) T-Rex/Asia Restaurants that are located at or associated with Disney (the “Disney Restaurants”), such Disney Restaurant shall have been open and operating for at least thirteen (13) months (“SCI’s Put Option”).

6.02 Purchase Price. The purchase price to be paid by Landry’s upon exercise of SCI’s Put Option shall be equal to the lesser of (i) the ratio of Three Million Five Hundred Thousand Dollars ($3,500,000) for every full Two Million Dollars ($2,000,000) in Restaurant Level Profit or (ii) Thirty Five Million Dollars ($35,000,000). Landry’s shall, at its option, be able to offset the purchase price by (x) any amounts owed to it pursuant to Section 2.06(b), (y) any damages or losses it has incurred as a result of a breach by SCI of a representation, warranty or covenant under this Agreement or the Contribution Agreement and (z) any indemnification owed pursuant to Article XI; provided, however, in the case of (y) and (z) above, such offset shall occur only after the amount of such damages or losses has been mutually agreed to by SCI and Landry’s or has been determined through arbitration pursuant to Article XII hereof. For purposes of (i) above, Restaurant Level Profit shall be calculated for the Trailing Twelve-Month Period as of the date of the Exercise Notice for all T-Rex/Asia Restaurants that have been open and operating for at least a full twenty-five (25) months or, with respect to any T-Rex/Asia Restaurant that is a Disney Restaurant, such Disney Restaurant shall have been open and operating for at least a full thirteen (13) months. For the avoidance of doubt, no T-Rex/Asia Restaurant (other than a Disney Restaurant) shall be used in the calculation of Restaurant Level Profit if it has not been open and operating for at least a full twenty-five (25) months.

6.03 Exercise Notice. Upon SCI’s exercising the SCI Put Option, it shall give Landry’s written notice thereof (the “Exercise Notice”).

6.04 Answering Notice. Within fifteen (15) business days after receipt of the Exercise Notice, Landry’s shall advise SCI in writing (the “Answering Notice”) of the proposed purchase price and a detailed explanation of the valuation methodology and supporting information utilized by Landry’s in arriving at its proposed purchase price.

6.05 Responding Notice. Within fifteen (15) business days after SCI receives the Answering Notice, SCI shall respond to Landry’s in writing (the “Responding Notice”) stating: (a) SCI’s agreement with Landry’s purchase price, (b) SCI’s disagreement with such purchase price and any revised purchase price, or (c) that SCI is withdrawing its Exercise Notice without prejudicing its rights under this Article VI.

6.06 Resolution of Disputed Value. In the event SCI and Landry’s fail to reach agreement on the purchase price within ten (10) business days following Landry’s receipt of the Responding Notice, either Party may refer the remaining matters in dispute to arbitration as described in Article XII.

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6.07 Payment of Purchase Price. As soon as practicable, but in no event later than forty-five (45) business days after the purchase price is finally established, Landry’s shall pay SCI the applicable purchase price in cash, subject to Landry’s withholding, pending the final outcome of arbitration pursuant to Article XII, of such amount as it reasonably estimates is necessary to cover any claim for which it would be entitled to offset. Upon payment of the purchase price, SCI shall cease to be a Stockholder in the Company and certificates representing Common Stock held by SCI shall be returned to the Company by SCI and cancelled by the Company.

6.08 Notice to Disney. In the event the SCI Put Option is exercised, the Company shall give Disney notice of the exercise at the address and in the manner provided for notice to be given under the terms of any existing lease agreement between the Company or any of its affiliates and Disney.

ARTICLE VII

LANDRY’S CALL OPTION

7.01 Call Options in Favor of Landry’s.

(a) Landry’s shall have the right to purchase all of SCI’s Common Stock (“Landry’s First Call Option”) (i) upon a Change in Control or (ii) anytime after three (3) years from the date hereof for a cash amount equal to Thirty-Five Million Dollars ($35,000,000).

(b) Landry’s shall have the right to purchase all of SCI’s Common Stock (“Landry’s Second Call Option”) anytime after five (5) years from the date hereof for a cash amount equal to the lesser of (i) the ratio of Three Million Five Hundred Thousand Dollars ($3,500,000) for every full Two Million Dollars ($2,000,000) in Restaurant Level Profit or (ii) Thirty Five Million Dollars ($35,000,000), if none of the following have occurred:

(1) the leased properties under the lease agreements between the Company or its affiliate and Disney related to “T-Rex” or Disney “Asia” have been delivered;

(2) an alternative site which has been reasonably approved by Landry’s, such as an alternative site in Anaheim, California, Downtown Disney or Animal Kingdom, has been delivered;

(3) a comparable site which has been reasonably approved by Landry’s, such as Universal Studios Theme Park in Florida or California, has been delivered; or

(4) another T-Rex/Asia Restaurant that has opened and is operating has revenues in its second full year of operation of greater than $25 million.

(c) Landry’s shall, at its option, be able to offset the amount to be paid under Landry’s First Call Option by (x) any amounts owed to it pursuant to Section 2.06(b), (y) any damages or losses it has incurred as a result of a breach by SCI of a representation, warranty or covenant under this Agreement or the Contribution Agreement not otherwise accounted for in (x) above, or (z) any indemnification owed pursuant to Article XI; provided, however,

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in the case of (y) and (z) above, such offset shall occur only after the amount of such damages or losses has been mutually agreed to by SCI and Landry’s or has been determined through arbitration pursuant to Article XII hereof; provided, however, that if payment of the purchase price is to be made prior to the final outcome of arbitration pursuant to Article XII, Landry’s shall be entitled to withhold such amount as it reasonably estimates is necessary to cover such claim from any payment to be made in accordance with this Section 7.01.

(d) Landry’s shall, at its option, be able to offset the amount to be paid under Landry’s Second Call Option by (w) any amounts paid to SCI pursuant to Section 3.01(a), (x) any amounts owed to it pursuant to Section 2.06(b), (y) any damages or losses it has incurred as a result of a breach by SCI of a representation, warranty or covenant under this Agreement or the Contribution Agreement not otherwise accounted for in (x) above, or (z) any indemnification owed pursuant to Article XI; provided, however, in the case of (y) and (z) above, such offset shall occur only after the amount of such damages or losses has been mutually agreed to by SCI and Landry’s or has been determined through arbitration pursuant to Article XII hereof; provided, however, that if payment of the purchase price is to be made prior to the final outcome of arbitration pursuant to Article XII, Landry’s shall be entitled to withhold such amount as it reasonably estimates is necessary to cover such claim from any payment to be made in accordance with this Section 7.01.

7.02 Exercise Notice. Upon the exercise of Landry’s First Call Option or Landry’s Second Call Option, as the case may be, by Landry’s it shall give SCI written notice thereof. The written notice shall state that Landry’s is exercising Landry’s First Call Option or Landry’s Second Call Option, as the case may be, and the date upon which such acquisition shall occur, which date shall be no longer than ten (10) business days from the date the notice is sent. Landry’s shall pay the purchase price, as may be offset pursuant to Section 7.01, by wire transfer in immediately available funds to an account designated by SCI. Upon payment of the purchase price, SCI shall cease to be a Stockholder in the Company and certificates representing Common Stock held by SCI shall be returned to the Company by SCI and cancelled by the Company.

7.03 Notice to Disney. In the event Landry’s First Call Option or Landry’s Second Call Option, as the case may be, is exercised, the Company shall give Disney notice of the exercise at the address and in the manner provided for notice to be given under the terms of any existing lease agreement between the Company or any of its affiliates and Disney.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES

8.01 Representations and Warranties. Each SCI and Landry’s represents and warrants to the other as follows:

(a) It has all requisite power, legal capacity and authority to execute, deliver and perform its obligations under this Agreement.

(b) This Agreement has been duly and validly authorized, executed and delivered by it, and constitutes a valid and binding obligation of it, enforceable against it in accordance with its terms except to the extent that enforceability may be limited by bankruptcy, insolvency or other similar laws affecting creditors’ rights generally.

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(c) The execution, delivery and performance of this Agreement by it does not (i) violate, conflict with, or constitute a breach of or default under its organizational documents, if any, or any material agreement to which it is a party or by which it is bound or (ii) violate any law, regulation, order, writ, judgment, injunction or decree applicable to it.

(d) No consent or approval of, or filing with, any governmental or regulatory body is required to be obtained or made by it in order to effectuate the transactions contemplated hereby.

(e) It is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with any provision of this Agreement or the rights of any party hereunder.

8.02 Closing Certificates. On the Closing Date, each of SCI and Landry’s shall have furnished to one another a certificate, dated as of the Closing Date, of the President or a Vice President and the Chief Financial Officer stating that the representations, warranties and agreements of such party contained in this Agreement are true and correct at and as of the Closing Date.

ARTICLE IX

CONFIDENTIALITY

9.01 Confidential Information. The Parties agree and acknowledge that, as a result of negotiating, entering into and performing this Agreement, each Party has and will have access to certain of the other Party’s Confidential Information. Each Party also understands and agrees that any misuse and/or disclosure of that information could adversely affect the other Party’s business. Accordingly, during the term of this Agreement and for a period of three (3) years thereafter, the Parties agree to keep such Confidential Information confidential and to use such information only in performing the activities contemplated under this Agreement. Upon written request at the expiration or termination of this Agreement, all such documented Confidential Information (and all copies thereof) owned by the requesting Party will be returned to the requesting Party.

9.02 Return or Destruction of Confidential Information. All materials provided to a Recipient Party containing Confidential Information shall remain the property of the Providing Party and shall be returned to the Providing Party upon its request, together with all copies thereof, within three business days following the request. In the event of such a request, in lieu of returning that portion of the Confidential Information which was prepared by the Recipient Party based on the Providing Party’s Confidential Information (including all copies, extracts and reproductions thereof), such portion of the Confidential Information may be destroyed, provided that the Party responsible for the destruction certifies in writing to the Providing Party that the destruction took place.

9.03 Legally Required Disclosures. If the Recipient Party is requested or required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand, or federal

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or state securities law, rule or regulation) to disclose any of the Confidential Information, it shall furnish the Providing Party with prompt written notice of such request or requirement in advance of its deadline together with a copy of the request or subpoena, and shall cooperate with the Providing Party so that the Providing Party may seek a protective order or other appropriate remedy. If such protective order or other remedy is not obtained, or if the Providing Party elects to waive compliance with the provisions hereof, the Recipient Party may disclose only the minimum portion of the Confidential Information that it is advised by counsel is legally required to be disclosed, and shall exercise reasonable efforts to obtain assurance that confidential treatment will be accorded the Confidential Information.

9.04 Remedies. Both Parties agree that monetary damages will not be a sufficient remedy for any breach of this Article IX and that both Parties shall be entitled to seek equitable relief, including a temporary restraining order, permanent injunction and specific performance, in the event of any actual or threatened breach of this Article IX by the other Party, in addition to all other remedies available at law or in equity. Both Parties agree to reimburse the other Party for all liability, loss, cost, damage or expense, including reasonable attorneys’ fees, incurred by such other Party in successfully enforcing its rights under this Article IX.

ARTICLE X

TERM AND TERMINATION

10.01 Date of Termination. The Company shall be dissolved and this Agreement shall terminate on the earlier to occur of:

(a) the decision of the Board of Directors;

(b) if the Closing Conditions have not occurred on or prior to March 10, 2006; or

(c) January 5, 2046.

10.02 Effect of Termination. If the Company is dissolved, then Company shall be wound up in accordance with applicable law. After the Company’s liabilities have been paid or provision is made therefor the Company will distribute its remaining assets first to the Stockholders in proportion to and to the extent of any loans made to the Company pursuant to Section 2.03 and, second to the Stockholder in proportion to its ownership of Common Stock.

ARTICLE XI

INDEMNIFICATION

11.01 Indemnification by SCI.

(a) SCI shall indemnify and hold Landry’s and each of its affiliates, employees, directors, distributors, agents, customers, licensees, attorneys, successors and assigns harmless from and against any and all losses, claims, damages, liabilities, whether joint or several, expenses (including legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative (a “Claim”), arising out of any matter pertaining to SCI or the Contributed Assets (other than with respect to the amounts owed on Assets on Consignment as further described on Schedule III and the Payables and Notes listed on Schedule V), prior to the Closing Date.

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(b) If any right, concepts, mark, design or other asset delivered to the Company under this Agreement or the Contribution Agreement is found to infringe or misappropriate or is likely to infringe or misappropriate, any third party’s Intellectual Property, SCI shall, at SCI’s choice and expense and in addition to the obligations set forth in Section 11.01(a) either (1) obtain from such third party the right for the Company to continue to use and sell the right, concepts, mark, design or other asset, or (2) modify the right, concepts, mark, design or other asset to avoid and eliminate such infringement or misappropriation, as the case may be; provided, however, that such modification shall comply with all quality requirements and specifications.

11.02 Indemnity for Excluded Liabilities. SCI further agrees to indemnify and hold Landry’s and each of its affiliates, employees, directors, distributors, agents, customers, licensees, attorneys, successors and assigns harmless from and against any Claims incurred or suffered by any of them arising out of, resulting from, or relating to any of the Excluded Liabilities.

11.03 Indemnity by Company. The Company further agrees to indemnify and hold SCI and each of its affiliates, employees, directors, distributors, agents, customers, licensees, attorneys, successors and assigns harmless from and against any Claims incurred or suffered by any of them arising out of the indemnification obligations of SCI under Section 14 of the Confirmatory Agreements by and between SCI and Cunningham Group Architecture, P.A., SCI and Rothweiler; SCI and Schuler; and SCI and Frattalon.

ARTICLE XII

DISPUTE RESOLUTION

12.01 Arbitration of Claims. (a) Any dispute, controversy, difference or claim arising out of or in connection with this Agreement, or the breach, termination or validity thereof, which cannot be amicably resolved by the Parties within 30 calendar days after receipt by a Party of written notice from any other Party that such a dispute, controversy, difference or claim exists shall be settled by final and binding arbitration in Houston, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “Commercial Arbitration Rules”); provided, however that either Party may seek an injunction in connection with such claim outside of arbitration in any court of applicable jurisdiction in Houston, Harris County, Texas. If any Party desires to submit a dispute to arbitration, such party shall notify the other in writing, setting forth the matter in controversy in reasonable detail (the “Arbitration Notice”). Any dispute shall be solely and finally settled by a board of arbitrators consisting of three (3) arbitrators. The Arbitration Notice shall appoint a qualifying non-neutral arbitrator. A “qualifying non-neutral” arbitrator shall be a person who is not (i) a present or former employee of either Party or an affiliate of either Party or (ii) currently counsel or a consultant to either Party or otherwise affiliated with either Party or an affiliate of either Party. Such qualifying non-neutral arbitrator hereafter may be referred to as the “First Arbitrator.” Within ten (10) business days following receipt of the Arbitration

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Notice and appointment of the First Arbitrator, the Party receiving such Arbitration Notice shall appoint a qualifying non-neutral arbitrator, as defined above. Such qualifying non-neutral arbitrator hereafter may be referred to as the “Second Arbitrator.” If either Party fails to select a non-neutral qualifying arbitrator or provide notice to the other Party of such selection within the ten (10) business day period, the selection of the Second Arbitrator shall be made by the American Arbitration Association (“AAA”). Within ten (10) business days following their selection, the First Arbitrator and Second Arbitrator shall select a third arbitrator (the “Third Arbitrator”). The Third Arbitrator shall be a “neutral” arbitrator who shall be a person not subject to disqualification under Rule No. 19 of the Commercial Arbitration Rules. If the First Arbitrator and Second Arbitrator fail to agree upon the selection of the Third Arbitrator within such ten (10) business day period, the AAA shall have the right to make such selection. The arbitration shall be conducted and concluded as soon as reasonably practicable, and in all events the decision of the arbitrator shall be made in writing within 30 days after the conclusion of discovery and in any event no later than 90 days after the appointment of the arbitrators.

12.02 Finality of Award. The Parties agree that the award of the arbitral tribunal (the “Arbitration Award”): (a) shall be conclusive, final and binding upon the Parties; (b) shall be the sole and exclusive remedy between the Parties regarding any and all claims and counterclaims presented to the arbitral tribunal; and (c) if containing elements of injunctive relief, as specifically provided for herein, may be made in such interim manner (pending final resolution of the controversy presented) as the arbitral tribunal may deem appropriate to protect the interests of any aggrieved or potentially aggrieved Party.

12.03 Applicable Law. The Arbitration Award shall be based exclusively on the provisions of this Agreement; provided, however, that to the extent that the subject matter for the Arbitration Award is not set forth within this Agreement, it shall be based on the laws of the State of Texas (without regard to conflicts of law provisions). In addition, in the case of any conflict between the provisions of the Commercial Arbitration Rules and the provisions of this Agreement, the provisions of this Agreement shall govern.

12.04 Waiver of Immunity. The Parties further agree: (a) that their mutual decision to resolve their disputes by arbitration as provided in this Agreement is an explicit waiver of immunity against enforcement and execution of the Arbitration Award and any judgment thereon; and (b) that the Arbitration Award and any judgment thereon, if unsatisfied, may be entered in and shall be enforceable by the courts of any nation having jurisdiction over the person or property of the Party against whom the Arbitration Award has been rendered.

12.05 Notice. All notices to be given in connection with the arbitration shall be as provided in Section 13.01 of this Agreement.

12.06 Payment. The Arbitration Award shall be made and shall be payable free of any tax or any other deduction. The Arbitration Award shall include interest, at a rate determined as appropriate by the arbitral tribunal, as of the date of any breach or other violation of this Agreement to the date when the Arbitration Award is paid in full.

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12.07 Expenses. All costs of arbitration and enforcement of the Arbitration Award, including reasonable attorneys’ fees and court costs, costs of expert witnesses, transportation, lodging and meal costs of the Parties and witnesses, costs of transcript preparation and other reasonable and necessary direct and incidental costs shall be apportioned by the arbitrator selected pursuant to Section 12.01 of this Agreement with a view to allocating costs to the Party that does not prevail in the arbitration.

12.08 Arbitral Ruling. The Parties will obtain the agreement of the arbitrator to the following: (a) the arbitrator shall provide a written ruling, stating in separate sections the finding of fact and conclusions of law on which the ruling is based and (b) such ruling shall be due no later than 30 days after the final hearing.

12.09 Specific Performance. In the event of any breach by a Party of the terms of this Agreement which would cause any non-breaching Party to be irreparably harmed or for which such non-breaching Party could not be made whole by monetary damages, then in such circumstances such non-breaching Party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of this Agreement in any action instituted pursuant to this Article XII and in any action instituted in any court of applicable jurisdiction in Houston, Harris County, Texas, to enforce any interim or final Arbitration Award rendered pursuant to this Article XII or to seek specific performance in any such court in lieu of arbitration.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

13.01 Notice. Wherever under this Agreement one Party is required or permitted to give notice to the other Party, such notice shall be made in writing by personal-delivery, first class mail (registered or certified, with return receipt requested), telecopier (with “answer back” confirmation), electronic mail (with “reply to confirm receipt”), or overnight air courier guaranteeing next day delivery. Notice shall be deemed given on the date of the receipt. The address for notice shall be as follows:

in the case of the Company,
Landry’s and Landry’s
Restaurants, Inc.:	1510 West Loop South
	Houston, Texas 77027
	Facsimile: (713) 386-7070
	Attention: Steven L. Scheinthal
	Email: sscheinthal@ldry.com
with a copy, which shall not constitute notice, to:	Baker Botts, L.L.P.
	910 Louisiana
	Houston, TX 77002
	Facsimile: (713) 229-1522
	Attention: Charles Szalkowski
	Email: charles.szalkowski@bakerbotts.com

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in the case of SCI:	858 Decatur Avenue North
	Golden Valley, MN 55427
	Facsimile: (763) 746-3701
	Attention: Steven Schussler
	Email: steven@schusslercreative.com
with a copy, which shall not constitute notice, to:	Maslon Edelman Borman & Brand
	3300 Wells Fargo Center
	90 South Seventh Street
	Minneapolis, MN 55402
	Facsimile: (612) 642-8313
	Attention: Douglas T. Holod
	Email: doug.holod@maslon.com

Any Party may change its address for notice by like notice.

13.02 Survival. The provisions of Article I, Article IV, Article VI, Article VII, Article IX, Article X, Article XI, and Article XII of this Agreement shall survive termination of this Agreement.

13.03 Authority. Each Party to this Agreement has the full corporate power, legal capacity and authority to execute and deliver this Agreement and to perform such Party’s obligations in this Agreement. This Agreement constitutes the legal, valid and binding obligation of each Party hereto, enforceable against each such Party in accordance with its terms, except as that enforceability may be (i) limited by any applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally or any applicable law that limits rights to indemnification or the application of public policy restrictions on non-competition agreements and (ii) subject to general principles of equity (regardless of whether that enforceability is considered in a proceeding in equity or at law).

13.04 Limitation on Liability. EXCEPT IN SATISFACTION OF INDEMNIFICATION OBLIGATIONS UNDER Article XI OF THIS AGREEMENT, NO PARTY WILL BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS, CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES, ARISING FROM OR RELATED TO THIS AGREEMENT, REGARDLESS OF THE TYPE OF CLAIM, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY, REGARDLESS OF WHETHER A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

13.05 Binding Nature and Assignment. This Agreement shall be binding on the Parties and their respective successors and assigns. No Party may assign this Agreement without the prior written consent of the other Party; provided, however, that Landry’s may assign this Agreement to one or more of its affiliates without the consent of SCI, provided that such affiliate agrees in writing to assume the obligations of Landry’s hereunder in accordance with Section 13.06.

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13.06 Transfer of Stock and Joinder. No Party shall Transfer all or any portion of its Common Stock in the Company unless the Transfer is approved by the Executive Committee; provided that such approval by the Executive Committee shall not be required for a Transfer of all or any portion of a Party’s Common Stock in the Company to an affiliate of such Party. In connection with any Transfer of all or any portion of Common Stock in the Company, such transferee shall execute and deliver a counterpart signature page to this Agreement and agree to become a party to and be bound by the provisions of this Agreement.

13.07 Performance by Landry’s Affiliates. Any rights or obligations of Landry’s hereunder may be exercised or satisfied by Landry’s or any one or more of its affiliates. Specifically, but without limitation, Landry’s may cause one of its affiliates to purchase SCI’s interest pursuant to SCI’s Put Option or pursuant to Landry’s First Call Option or Landry’s Second Call Option. In the event an affiliate of Landry’s purchases SCI’s Common Stock, it shall become a party to this Agreement pursuant to the terms of Section 13.06.

13.08 Force Majeure. No Party shall be liable for any delay in completion of work hereunder or of the non-performance of any term or condition of this Agreement directly or indirectly resulting from delays caused by Acts of God; acts of the public enemy; strikes; lockouts; epidemic and riots; power failure; water shortage or adverse weather conditions; or other causes beyond the control of the Parties. In the event of any of the foregoing, the time for performance shall be equitably and immediately adjusted, and in no event shall any Party be liable for any consequential or incidental damages from its performance or non-performance of any term or condition of this Agreement. The Parties shall resume the completion of work under this Agreement as soon as possible subsequent to any delay due to force majeure.

13.09 Publicity; Confidentiality. Except as provided elsewhere in this Agreement, all media releases, public announcements and public disclosures by any Party relating to this Agreement or the subject matter of this Agreement, including promotional or marketing material (but not including any announcement intended solely for internal distribution or any disclosure required by legal, stock exchange, accounting or regulatory requirements beyond the reasonable control of the Party), will be coordinated with and will be subject to final approval by Landry’s prior to release (which approval shall not be unreasonably withheld or delayed). Subsequent to any media release, public announcement or public disclosure announcing the existence of this Agreement, Landry’s shall have the right to list on its web-site the name of SCI and the fact that SCI has entered into this Agreement for as long as this Agreement is in existence. Except as expressly set forth in this Section 13.09, the terms of this Agreement constitute Confidential Information.

13.10 No Implied Licenses. No rights or licenses with respect to a Party’s Intellectual Property, Confidential Information, trademarks or other proprietary rights are granted or deemed granted to the other Party hereunder or in connection herewith, other than those rights expressly granted in this Agreement.

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13.11 Amendment; Waiver. This Agreement may not be modified or amended except by a written instrument executed by or on behalf of each of the Parties to this Agreement. No delay or omission by any Party to exercise any right or power shall impair such right or power or be construed as a waiver. A waiver by any Party of any of the covenants to be performed by the other Party or any breach shall not be construed to be a waiver of any succeeding breach or of any other covenant.

13.12 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in that jurisdiction as if the invalid, illegal or unenforceable provision had never been contained herein.

13.13 Governing Law; Jurisdiction. This Agreement will be governed by and construed in accordance with the laws of the State of Texas, without reference to the conflicts of laws principles thereof. Except for actions or proceeding subject to mandatory arbitration as provided in Article XII hereof, any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the Parties only in the courts of the State of Texas, Harris County, or, if it has or can acquire jurisdiction, in the United States District Court for the Southern District of Texas, and each of the Parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein.

13.14 Headings. Any headings or captions included herein are for convenience of reference only and shall not be used to construe this Agreement.

13.15 Counterparts. This Agreement may be executed in two or more counterparts or by facsimile transmission, each of which shall be deemed to be an original, but all of which together shall constitute one agreement binding on both Parties, notwithstanding that all the Parties are not signatories to the original or the same counterpart or facsimile transmission copy.

13.16 Entire Agreement. This Agreement, the Management Agreement and the Contribution Agreement constitute the entire agreement among the Parties with respect to the subject matter of this Agreement and supersede all prior or contemporaneous agreements and understandings, whether written or oral, between the Parties with respect to the subject matter of this Agreement. There are no representations, understandings or agreements that are not fully expressed in this Agreement, the Management Agreement and the Contribution Agreement.

[Signature Page Follows]

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

T-REX CAFE, INC.
By:	/s/ Steven L. Scheinthal
	Steven L. Scheinthal
	Vice President
LCHLN, INC.
By:	/s/ Steven L. Scheinthal
	Steven L. Scheinthal
	Vice President
SCHUSSLER CREATIVE, INC.
By:	/s/ Steven W. Schussler
	Steven W. Schussler
	President
Solely in connection with Section 2.07:
LANDRY’S RESTAURANTS, INC.
By:	/s/ Steven L. Scheinthal
	Steven L. Scheinthal
	Executive Vice President

Schedule I

Asia Assets

Schedule II

T-Rex Assets

Schedule III

Assets on Consignment

Schedule IV

SCI Intellectual Property

Schedule V

Payables and Notes

Schedule VI

Cost Cap

Location	Approximate Capital Expenditure
Kansas City “T-Rex” Kansas City, Missouri	$2 million
Disney “Asia” Disney World, Orlando, Florida	$10 million
Mohegan Sun “T-Rex” Connecticut	$5 million
Total	$17 million
Plus approximate pre-opening expenses of $1 million per location	$3 million
Total	$20 million
Multiplied by a 20% cost overrun	1.2
COST CAP	$24.0 million

Exhibit A

Contribution Agreement

Exhibit B

Escrow Agreement

Exhibit C

Management Agreement

Exhibit D

Form of Consulting Agreement

EX-10.34

Exhibit 10.34

STOCK PURCHASE AGREEMENT

BY AND AMONG

JCS Holdings, LLC,

(Purchaser),

LSRI HOLDINGS, INC.

AND

LANDRY’S RESTAURANTS, INC.,

(Sellers)

October 9, 2006

TABLE OF CONTENTS

		Page
ARTICLE I PURCHASE AND SALE		1
1.1	Seller Restructuring	1
1.2	Purchase and Sale of Newco	7
ARTICLE II CLOSING ITEMS TO BE DELIVERED AND THIRD PARTY CONSENTS		10
2.1	Closing	10
2.2	Items to be Delivered at Closing	10
ARTICLE III REPRESENTATIONS AND WARRANTIES		13
3.1	Representations and Warranties of Sellers and Landry’s	13
3.2	Representations and Warranties of Purchaser	29
ARTICLE IV AGREEMENTS		31
4.1	Conduct of Business	31
4.2	Update Schedules	33
4.3	Maintenance of Insurance	34
4.4	Confidentiality	34
4.5	Commercially Reasonable Efforts	34
4.6	Access to Information and Personnel	35
4.7	Landlord Consents	36
4.8	Termination of Affiliate Transactions	37
4.9	Bank Accounts; Lockboxes	37
4.10	Reciprocal Easement	37
4.11	Private Clubs	37
4.12	Egyptian Deposit	37
4.13	Rancho Cucamonga	37
ARTICLE V CONDITIONS PRECEDENT TO THE CLOSING		38
5.1	Conditions Precedent to Purchaser’s Obligations	38
5.2	Conditions Precedent to the Obligations of Seller and Landry’s	39
ARTICLE VI INDEMNIFICATION		39
6.1	Indemnification by Sellers and Landry’s	39
6.2	Indemnification by Purchaser	40
6.3	Indemnification Procedures	40
6.4	Calculation of Losses	42
6.5	Exclusive Remedy	43
6.6	Limitation and Expiration	43
6.7	No Consequential Damages	44
ARTICLE VII CERTAIN TAX MATTERS		44
7.1	Pre-Closing Taxes	44
7.2	Straddle Period Taxes	44
7.3	Section 338(h)(10) Election	45

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ARTICLE VIII ADDITIONAL AGREEMENTS		45
8.1	Exclusivity	45
8.2	Employee Matters	46
8.3	Maintenance of Books and Records	48
8.4	Payments Received	48
8.5	Transition Services Agreement	48
8.6	Licenses	48
8.7	Gift Cards	49
8.8	Release of Guarantees	49
8.9	Non-Solicitation/Non-Hire Agreement	49
8.10	Publicity	49
8.11	Expenses; Transfer Taxes, and the Like	50
8.12	Transfer of Licenses and Permits	50
8.13	Restrictions on Assignment, Renewal and Subletting	50
8.14	Consents	51
8.15	Further Assurances, Post-Closing Cooperation	51
8.16	Title Policies	52
8.17	Surveys	52
8.18	Billboard	52
ARTICLE IX MISCELLANEOUS		52
9.1	Termination	52
9.2	Effect of Termination and Abandonment	53
9.3	Bulk Sales Law	53
9.4	Expenses	53
9.5	Contents of Agreement; Amendments	53
9.6	Assignment and Binding Effect	53
9.7	Waiver	54
9.8	Notices	54
9.9	Governing Law	55
9.10	No Benefit to Others	55
9.11	Headings, Gender and “Person”	55
9.12	Schedules and Exhibits	55
9.13	Severability	55
9.14	Counterparts; Facsimile Signatures	55
9.15	No Strict Construction	55
9.16	Jurisdiction and Service of Process	56
9.17	Risk of Loss	56

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LIST of ANNEXES, EXHIBITS and SCHEDULES

ANNEXES
I	Definitions
EXHIBITS
A	Joe’s Crab Shack Restaurant Locations
A-l	Real Property; Leases
A-2	Required Consents and Store EBITDA
SCHEDULES
I	Newco Interests
II	Purchaser Knowledge Group
Assets
1.1.1(a)(v)	Assigned Contracts
1.1.1(a)(vii)	Marks
1.1.1(a)(ix)	Computer Hardware, Software, Software Licenses and Peripherals
1.1.1(b)(vii)	JCS Excluded Contracts
1.1.1(b)(viii)	JCS Excluded Assets
1.1.2(a)(i)	Assumed Working Capital Liabilities
1.1.2(b)(vii)	Pending Claims
1.1.2(b)(i)	Working Capital
1.2.3	Allocation of Purchase Price and Liabilities Among Assets
Sellers’ Disclosure Schedule
3.1.2(a)	Authorized, Issued and Outstanding Capital Stock of Newco and Record Shareholders
3.1.2(c)	Newco Equity Holdings and Required Filings and Consents
3.1.5(a)	Conflicts
3.1.5(b)	Required Filings Marks and Consents
3.1.6(a)	Financial Statements; Deviations from GAAP evidenced on Consolidated Balance Sheet
3.1.6(b)	Liabilities
3.1.6(c)	Internal Control
3.1.8	Liens against Real Property
3.1.9	Ownership of Tangible Assets
3.1.10(a)	Material Contracts
3.1.10(b)	Material Defaults Under Material Contracts; Notices to Terminate Material Contracts
3.1.11(a)	Real Property Under Lease Other Than Leased Property; Disputes and Encumbrances Regarding the Leases
3.1.11(b)	Fee Property
3.1.11(c)	Leasehold Options
3.1.12(a)	Registration for Marks Copyrights; Material Unregistered Marks and Software Licenses
3.1.12(b)	Liens and Limitations on Intellectual Property
3.1.12(c)	Intellectual Property Disputes and Claims

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3.1.12(e)	Licenses, Sublicenses and Other Agreements Granted by Sellers Regarding Use of Intellectual Property
3.1.13	Permits
3.1.14	Tax Matters
3.1.15	Notices Alleging Violations of Applicable Laws, Except Permits, Taxes and Environmental Law Matters
3.1.16	Violations of Environmental Laws
3.1.19(a)	Benefit Plans
3.1.19(c)	Corporate Benefit Plans With Change of Control Provisions
3.1.19(d)	Violations and Claims Related to Corporate Benefit Plans
3.1.20(a)	Business Employees; Employees on Leave of Absence
3.1.20(b)	Employment Matters
3.1.22	Material Changes and Events Outside the Normal Course of Business
3.1.23	Defaults and Events With Materially Adverse Effects
3.1.24	Insurance Policies and Loss Runs
3.1.26	20 Largest Suppliers
3.1.27	Affiliate Transactions
3.1.28	Litigation
Purchaser’s Disclosure Schedule
3.2.5	Debt and Equity Commitment Letters
3.2.7	Litigation
Other
4.1(b)(iii)	Employee List
4.7	Lease Consents
4.8	Termination of Affiliate Transactions
4.10	Reciprocal Easement
8.2(a)	Employment Offers
8.6(a)	Restaurants to Which the Joe’s Intellectual Property License Applies
8.6(b)	Joe’s Intellectual Property Rights
8.7	Gift Cards

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STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (the “Agreement”), is made and entered into as of this 9th day of October, 2006, by and among LSRI Holdings, Inc. (“Seller”) and Landry’s Restaurants, Inc. (“Landry’s”) and JCS Holdings, LLC, a Delaware limited liability company (“Purchaser”).

WITNESSETH:

A. Seller has been and is engaged indirectly through stock ownership of 38 entities in the business of operating the Joe’s Crab Shack restaurants, located at the locations listed on Exhibit A attached hereto (such business being referred to herein as the “Business” and such locations being referred to herein as the “Premises”);

B. Seller owns (or will at the Closing own) beneficially and of record one hundred percent of the equity ownership interest (the “Newco Interests”) of the Persons listed on Schedule I hereto (collectively, “Newco”);

C. Newco owns (or will at the Closing own) the assets and liabilities relating to the Business conducted on the Premises as more fully set forth in this Agreement;

D. Purchaser desires to acquire from Sellers (as defined below) and Landry’s, and Sellers and Landry’s desire to sell to Purchaser, Newco and the Newco Interests, all upon and subject to the terms and conditions hereinafter set forth;

E. As used herein, the term “Sellers” shall mean Seller and the entities owning the Business, Assets and Premises being sold hereby; and

F. Capitalized terms used but not defined in the body of the Agreement have the respective meanings set forth in Annex 1.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants, representations, warranties and agreements herein contained, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

PURCHASE AND SALE

1.1 Seller Restructuring.

1.1.1 Contribution of Assets. On or prior to the Closing, upon and subject to the terms and conditions of this Agreement, Landry’s and Sellers shall grant, sell, convey, assign, transfer and deliver to Newco, either directly or indirectly, in a manner reasonably satisfactory to Purchaser, all right, title and interest of Sellers in and to all of the assets, properties and rights used in connection with operating the Business and the Assets, as set forth in Section 1.1.1 (a) (which assets, properties and rights are herein sometimes called the “Assets”), in all cases free

and clear of all Liens other than Permitted Liens; provided that to the extent that Landry’s and Sellers contribute any equity securities to Newco, Landry’s and Sellers shall, prior to such contribution, distribute to an entity that is not part of the Business all Excluded Assets and all Excluded Liabilities and ensure that no entity, the equity securities of which will be contributed to Newco (x) is subject to any Liability other than the Assumed Liabilities, or (y) participates in or is obligated to contribute to any Corporation Benefit Plan. The creation of Newco and the transfers described above is hereinafter referred to as the “Restructuring”.

(a) Included Assets. The Assets shall include any and all property, asset or rights thereto of Sellers and Landry’s required by Sellers and/or Landry’s to operate the Business or the Assets, of every type and description, tangible and intangible, whether or not reflected on the books and records of Sellers or Landry’s, made a part hereof, and located as described on Exhibit A (or used by the Transferred Employees), excepting such assets identified as “Excluded Assets” in Section 1.1.1 (b) hereof, and including, but not limited to, any of the following:

(i) all of Sellers’ right, title and interest in all leases, subleases, real estate licenses, concessions and other agreements which are identified on Exhibit A-1 hereto (as amended, the “Leases”), pursuant to which Sellers hold a leasehold or subleasehold estate in, or are granted the right to use or occupy, any land, buildings, structures, improvements, fixtures or other interest in real property which is used or intended to be used in, or otherwise related to, the Business, together with all buildings, structures, improvements and fixtures located in or on such Leasehold interests which are owned by Sellers or Landry’s, regardless of whether title to such buildings, structures, improvements or fixtures are subject to reversion to the landlord or other third party upon the expiration or termination of the Lease for such leasehold interests (“Leasehold Improvements”), including, without limitation all rights in and to any security deposits, utility deposits and any other deposits (the “Leased Property”) and all land, owned by Sellers and used or intended to be used in, or otherwise related to, the Business, which are separately identified on Exhibit A-1 hereto, together with all buildings, structures and fixtures located thereon and other improvements owned by Sellers that are located in or on such properties (collectively, the “Fee Property”) (the Leased Property and the Fee Property are sometimes collectively referred to as the “Real Property”);

(ii) all tenements, hereditaments, easements, rights-of-way, rights, licenses, patents, rights of ingress and egress, reversionary interests, privileges and appurtenances belonging, pertaining or relating to the Real Property, any and all rights to the present or future use of wastewater, wastewater capacity, drainage, water or other utility facilities relating to the Real Property, including, without limitation, all reservations of or commitments or letters covering any such use in the future, whether now owned or hereafter acquired, and the entire right, title and interest of Sellers, if any, in, to and under all streets, ways, alleys, passages, strips, gores, pipes, pipelines, sewers, sewer rights, ditches, waters, water courses, water rights and powers, air rights, railroad sidings, minerals, mineral rights and mineral interests adjoining, upon, above, in, under or pertaining to the Real Property, and all claims or demands whatsoever of Landry’s or Sellers, either in law or in equity, with respect to the Real Property, including, without limitation, any unpaid awards to be made relating thereto, including any unpaid awards or damages payable by reason of damage thereto or by reason of a widening of any adjoining streets or roads or a changing of the grade with respect to same, but in each case only to the extent Sellers or Landry’s owns and has the right to convey the same to Purchaser (the “Appurtenant Rights”);

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(iii) all appliances, kitchen equipment, office equipment and other equipment, tools, spare parts, signage, decor items, fixtures, furniture, furnishings, leasehold improvements, dinnerware, glassware, flatware, linens and other tangible personal property located at the Premises and relating to or used in connection with the operation of the Business or the Assets;

(iv) all food and beverages, including alcoholic beverages, whether opened or unopened, all other raw materials and ingredients, packing materials and supplies (together, the “Inventory”) located at the Premises;

(v) all rights, title and interest of Sellers or Landry’s under written or oral Contracts entered into by Sellers or Landry’s, their Affiliates or assigns, in connection with the operation of the Business as listed on Schedule l.l.l(a)(v) (together with the Leases, the “Assigned Contracts”);

(vi) all transferable governmental licenses, registrations, certificates of occupancy or other permits or approvals of any nature of Landry’s or Seller or any of their Subsidiaries relating to the Business or the Assets (“Permits”);

(vii) all rights of Landry’s or Sellers in, to or under any trademark, service mark, trade dress, trade name, corporate name, copyright, Internet domain name, logo or slogan (collectively, “Marks”) used solely in connection with the operation of the Business or the Assets, whether registered or unregistered, and any similar or equivalent rights to the foregoing anywhere in the world, and any registrations or applications for registration thereof and all goodwill of the Business associated therewith, including, without limitation, those items set forth on Schedule l.l.1(a)(vii) hereto and the name “Joe’s Crab Shack” and any variations thereof. To the extent Landry’s or any of its Affiliates own any such Marks which are or have been used or held for use by the Business and restaurant concepts other than Joe’s Crab Shack (the “Joint Use Marks”), Landry’s shall enter into the Joint Use Agreement providing for Purchaser’s use of such Marks. Schedule 1.1.1 (a)(vii) sets forth the Joint Use Marks. Such Joint Use Agreement shall also provide for Purchaser’s use of all Joint Advertising Material as set forth on such Schedule l.l.l(a)(vii):

(viii) all right, title and interest of Landry’s or any Sellers in, to or under any technologies, methods, data bases, trades secrets, know-how, manufacturing and other processes, inventions, formulae, recipes and mixing instructions, customer and supplier lists, and any other intellectual property relating to or used in connection with the operation of the Business or the Assets at the Premises (including all Joe’s Intellectual Property Rights), and all patents, patent applications, registrations and applications relating thereto;

(ix) all computer hardware, software, software licenses and peripherals of Landry’s or any Seller relating to or used in connection with the operation of the Business or the Assets at the Premises, including, without limitation, such items listed on Schedule 1.1.1(a)(ix) hereto;

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(x) all of Sellers’ or Landry’s books, records, papers and instruments of whatever nature and wherever located that relate to the operation of the Business or any of the Assets or that are required or necessary in order for Purchaser to conduct the Business from and after the Closing Date in the manner in which it is presently being conducted, including, without limitation, blueprints, specifications, plats, maps, surveys, building and machinery diagrams, correspondence from any lessor relating to any of the Leased Property, all Lease files, accounting and financial records, maintenance and production records, recipe books, operating and policy manuals, personnel and labor relations records, environmental records and reports, sales and property Tax records and returns, sales records, customer lists, records relating to suppliers, menus, marketing brochures, but excluding income Tax records and returns and corporate minute book and stock records;

(xi) all rights or choses in action, including, without limitation all rights under express or implied warranties, representations and guaranties relating to the Business or the Assets;

(xii) all telephone numbers and telephone listings of Sellers;

(xiii) all house banks located at the Premises on the Closing Date (which in no event shall be less than an aggregate of $300,000) and all armored car service and everything else used in connection with current cash collection practices at the Premises (other than deposits, bank accounts or lock boxes);

(xiv) all goodwill of the Business;

(xv) all assets, artwork, advertising and marketing materials, equipment, furniture and fixtures, brochures, testimonials, and pictures located at the Premises or relating to the Business or the Assets; and

(xvi) all assets included in the Working Capital as set forth on the Closing Financial Statement.

(b) Excluded Assets. Notwithstanding anything set forth in Section 1.1.1 hereof, the Assets shall not include the following “Excluded Assets”:

(i) the certificate of incorporation, minute books, Tax Returns, books of account or other records having to do with the organization of any Seller;

(ii) the rights which accrue or will accrue to any Seller or Landry’s under this Agreement;

(iii) any bank accounts or lock boxes of any Seller;

(iv) any cash or cash equivalents (including marketable securities and short-term investments) and other securities held by any Seller (other than house banks located at the Premises on the Closing Date);

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(v) all insurance policies of any Seller; other than windstorm policies set forth on Schedule 3.1.24;

(vi) any assets located at, on or in Landry’s corporate headquarters, or in any warehouse that are not primarily used in the operation of the Business and any other assets not used in the Business;

(vii) the rights of any Seller under any Contract, other than the Assigned Contracts (such other Contracts, “Excluded Contracts”), including without limitation, contracts entered into with suppliers, etc., that relate to more than one of Landry’s restaurant concepts (the “JCS Excluded Contracts”), the JCS Excluded Contracts being listed on Schedule l.l.1(b)(vii);

(viii) the other assets, properties or rights, if any, set forth on Schedule l.l.l(b)(viii);

(ix) any assets relating to any “employee benefit plan” as defined by Section 3(3) of ERISA, all specified fringe benefit plans as defined in Section 6039D of the Code, and all other bonus, incentive compensation, deferred compensation, profit sharing, stock option, stock appreciation right, stock bonus, stock purchase, employee stock ownership, savings, severance, supplemental unemployment, layoff, salary continuation, retirement, pension, health, life insurance, dental, disability, accident, group insurance, fringe benefit or welfare plan, and any other compensation or benefit plan, program, agreement, policy, practice, commitment, contract, or understanding (whether qualified or nonqualified, currently effective or terminated, written or unwritten), and any trust, escrow or other agreement related thereto, sponsored, established, maintained or contributed to or required to be contributed to by any Seller, Landry’s or any of their Affiliates or for which any Seller, Landry’s or any of their Affiliates has any Liability or obligation, contingent or otherwise (collectively, the “Corporation Benefit Plans”),

(x) all assets of Landry’s or any of its Affiliates relating to any Joe’s Crab Shack, or other restaurant, casino, hotel or entertainment complex being retained by Landry’s or its Affiliates following Closing or which were not located on the Premises or which are used for general and administrative services not conducted on the Premises; and

(xi) all assets of Landry’s or any of its Affiliates relating to any Joe’s Crab Shack not set forth on Exhibit A.

1.1.2 Assumption of Liabilities.

(a) Assumed Liabilities. On or prior to the Closing, subject to the terms of this Agreement, including Section 1.1.2(b) hereof, Newco shall assume and agree to pay, discharge or perform, as appropriate, when due and payable and otherwise in accordance with the relevant governing agreements, the following (and only the following) Liabilities and obligations of Sellers (the “Assumed Liabilities”):

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(i) all Liabilities set forth on Schedule 1.1.2(a)(i) which are included in the Working Capital as set forth on the Closing Financial Statement or are included on Schedule 3.1.6(b);

(ii) all Liabilities and obligations of Seller in respect of the Permits and Assigned Contracts;

(iii) all Liabilities and obligations under or arising from the Permitted Liens;

(iv) all liabilities for sales taxes as of the Closing Date; and

(v) all Liabilities and obligations incurred in, resulting from or arising out of, the use, operation, ownership or control of the Assets or the operation of the Business or the Premises, on or after the Closing Date.

(b) Excluded Liabilities. Neither Newco nor Purchaser shall assume any Liabilities, commitments or obligations (contingent or absolute and whether or not determinable as of the Closing) of any Seller or Landry’s (including any predecessor), except for the Assumed Liabilities as specifically and expressly provided for above, whether such Liabilities or obligations relate to payment, performance or otherwise, and all Liabilities, commitments or obligations not expressly transferred to Newco hereunder as Assumed Liabilities (the “Excluded Liabilities”) shall be retained or assumed by the Sellers and Landry’s, who shall remain liable therefor. For the avoidance of doubt and without limitation to the foregoing, all of the following shall be considered Excluded Liabilities (whether or not disclosed, referred to, accrued or reserved for on the Financial Statements or any Disclosure Schedule or Exhibit hereto):

(i) any Liabilities or obligations in respect of any Funded Indebtedness of Landry’s, any Seller or Newco;

(ii) any Liabilities or obligations arising out of, resulting from or relating to (A) any claim, obligation or litigation, regardless of when made, asserted, or instituted, arising out of or relating to the conduct of the Business or events or conditions at the Premises prior to the Closing so long as any such claim, obligation or liability is not scheduled on Schedule 1.1.2(a)(i), (B) the California Break-Pay Litigation or (C) claims or expenses incurred but not yet reported as of the Closing;

(iii) any Liabilities or obligations, whether or not reflected in the Financial Statements, in respect of escheatable property or the failure to properly account for, report and remit such property to any applicable Governmental Authority; and

(iv) any claims, Liabilities or obligations arising out of, resulting from or relating to the Excluded Assets, including the Excluded Contracts;

(v) any Liabilities or obligations arising pursuant to Environmental Laws in respect of the ownership or operation of the Business or its properties or facilities prior to the Closing;

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(vi) (A) any Liability or obligation relating to or arising under any Corporation Benefit Plan, any “employee benefit plan” (as defined in Section 3(3) of ERISA), or any other benefit plan, program or arrangement at any time maintained, sponsored, contributed or required to be contributed to by Sellers, Landry’s or any of their Affiliates, or with respect to which Sellers, Landry’s or any of their Affiliates has any current or potential Liability or obligation, and (B) any Liability or obligation arising out of, relating to or incurred in connection with the employment or service by, or termination from employment or service with (including in connection with the Restructuring), Sellers, Landry’s or any of their Affiliates, of any Person, including any and all Liabilities or obligations pertaining to any salary or wages, bonuses or any other type of compensation or benefits except to the extent accrued in the Working Capital as set forth on the Closing Financial Statements;

(vii) any Liability arising from any pending claim as set forth on Schedule 1.1.2(b)(vii); and

(viii) claims or expenses incurred but not yet reported as of the Closing Date.

1.2 Purchase and Sale of Newco. At the Closing hereunder, Purchaser shall purchase from Sellers, upon and subject to the terms and conditions of this Agreement and in reliance on the representations, warranties, covenants and agreements of Seller and Landry’s contained herein, all right, title and interest of Seller in and to the Newco Interests, free and clear of all Liens, in exchange for the Purchase Price.

1.2.1 The Purchase Price.

(a) Purchase Price. The Purchase Price shall be an amount equal to $180,000,000, subject to adjustment as provided in Section 1.2.1(b)(iii) and in Section 1.2.1(c)(iv) (the “Purchase Price”).

(b) Estimated Purchase Price. The Purchase Price shall be adjusted at the Closing as follows.

(i) Seller shall prepare, in good faith and deliver to Purchaser no later than five (5) business days before the Closing a calculation of Working Capital as of the Closing as calculated in accordance with Schedule 1.2.1(b)(i);

(ii) As promptly as practicable, but not later than two (2) business days prior to the Closing Date, Purchaser shall identify any adjustments that it believes are required to the calculation of Working Capital delivered by Seller. If Purchaser identifies any such adjustments, the Parties shall use commercially reasonable efforts to resolve such dispute after which Seller shall redeliver to Purchaser the calculation of Working Capital. The amount of Working Capital finally delivered pursuant to this Section 1.2.1(b)(ii)) and acceptable to the Parties is referred to herein as the “Estimated Working Capital”.

(iii) If the Estimated Working Capital exceeds the Target Working Capital, then the Purchase Price shall be increased by the amount equal to such excess, up to an amount of Five Hundred Thousand Dollars ($500,000) (such payment, the “Estimated

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Working Capital Excess Payment”). If the Target Working Capital exceeds the Estimated Working Capital, then the Purchase Price shall be reduced by the amount, by which the Target Working Capital exceeds the sum of (x) the Estimated Working Capital, plus (y) $500,000 (but in no event shall such sum be more than zero) (such payment reduction, the “Estimated Working Capital Shortfall Reduction”). If the Estimated Working Capital is equal to the Target Working Capital, there shall be no adjustment.

(c) Net Adjustment.

(i) Purchaser shall within 90 days after the Closing Date, prepare (or cause to be prepared) and deliver to Landry’s a balance sheet of Newco as of the Closing Date (the “Closing Financial Statement”). The Closing Financial Statement shall be prepared in a manner consistent with the preparation of the Financial Statements, and Landry’s shall provide Purchaser with access to all copies of all work papers and other relevant documents necessary to accurately prepare the Closing Financial Statement.

(ii) Purchaser shall provide Landry’s with access to copies of all work papers and other relevant documents to verify the information contained in the Closing Financial Statement. Landry’s shall have a period of thirty (30) calendar days after delivery to review the Closing Financial Statement and shall make any objections to the Closing Financial Statement in writing (the “Notice of Objection”) to Purchaser within such thirty (30) calendar day period. If the Notice of Objection, which shall set forth in reasonable detail the items and amounts in dispute, is delivered to Purchaser within such thirty (30) calendar day period, then Landry’s and the Purchaser shall attempt to resolve the matter or matters in dispute. If disputes with respect to the Closing Financial Statement provided pursuant to this Section 1.2.1(c)(ii) cannot be resolved by the Purchaser and Landry’s within fifteen (15) calendar days after the delivery by the Purchaser to Landry’s of the Notice of Objection, then either Party upon notice to the other Party may submit the specific matters in dispute to KPMG (the “Independent Accounting Firm”). If for any reason the Independent Accounting Firm is unavailable to resolve such dispute between Purchaser and Landry’s and if Purchaser and Landry’s are also unable to mutually agree upon the designation of a nationally recognized public accounting firm within fifteen (15) days after the dispute has been referred to the Independent Accounting Firm pursuant to the preceding sentence, any Party hereto may thereafter request that the American Arbitration Association (“AAA”) make such designation. The Independent Accounting Firm will determine only those items disputed in the Notice of Objection and still unresolved by the Parties and shall request a statement from Purchaser and Landry’s regarding each disputed item. The Independent Accounting Firm shall render its determination within forty-five (45) calendar days of the referral of the matter, which determination shall be in writing and set forth in reasonable detail, the basis therefor. The determination as to any disputed item may not be greater than the greatest value claimed for that item by any party, nor lower than the lowest such value claimed. The determination of the Independent Accounting Firm shall be final and binding on the Parties and any adjustments will be paid as described in Section 1.2.1(c)(iv)(D) below. All fees and expenses relating to the work, if any, to be performed by the Independent Accounting Firm will be allocated between the Purchaser and Landry’s in the same proportion that the aggregate amount of the disputed items so submitted to the Independent Accounting Firm that is unsuccessfully disputed by each such Party (as finally determined by the Independent Accounting Firm) bears to the total amount of such disputed items so submitted.

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(iii) If no written objections are made within the time periods provided above, or once objections are resolved and withdrawn or any dispute is resolved pursuant to Section 1.2.1(c)(ii), the Closing Financial Statement shall become final and binding and shall be deemed the “Closing Financial Statement” and the Working Capital set forth on such Closing Financial Statement shall be referred to as the “Final Working Capital” and the Purchase Price shall be further adjusted as described in Section 1.2.1(c)(iv).

(iv) At the time the Closing Financial Statement becomes final and binding on the Parties, the Purchase Price will be adjusted as follows:

(A) If the Final Working Capital exceeds the Target Working Capital, the Purchase Price shall be increased by an amount equal to the amount of such excess, and Seller shall be paid an amount equal to the amount of such excess minus (ii) any Estimated Working Capital Excess Payment, plus (iii) the amount of any Estimated Working Capital Shortfall Reduction.

(B) If the Target Working Capital exceeds the Final Working Capital, the Purchase Price shall be decreased by an amount equal to the amount of such excess and Seller shall repay to Purchaser an amount equal to the sum of (i) the amount of such excess, plus (ii) any Estimated Working Capital Excess Payment, minus (iii) the amount of any Estimated Working Capital Shortfall Reduction.

(C) If the Final Working Capital is equal to the Target Working Capital, any payment made pursuant to Section 1.2.1(b)(iii) shall be refunded to the other Party.

(D) All such amounts shall be paid in cash within five (5) days of the date that the Closing Financial Statement becomes final and binding on the Parties.

1.2.2 Prorations. To the extent included in Working Capital on the Closing Financial Statement, the obligations and liabilities listed below relating to the Premises and/or Assets will be prorated as of the Closing Date, with Sellers liable to Purchaser therefor to the extent such items relate to any time period up to and including the day prior to the Closing Date and Purchaser liable to Seller therefor to the extent such items relate to any time period commencing on or after the Closing Date: ad valorem, occupancy and water taxes, if any, on or with respect to the Business, the Premises and/or Assets; rents, taxes and similar items payable by Seller under any Assigned Contract; the amount of any license or registration fees paid to a Governmental Authority with respect to any Permits which are being assigned or transferred hereunder; the amount of sewer rents and charges for water, telephone, electricity and other utilities and fuel; and any other items which are normally prorated in connection with similar transactions. Sellers agree to furnish Purchaser with such documents and other records as Purchaser reasonably requests in order for Purchaser to calculate all adjustments and prorations pursuant to this Section 1.2.2 The amount of such prorations owed by Purchaser or Sellers pursuant to this Section 1.2.2 shall be paid to Purchaser by Sellers or to Sellers by Purchaser, as the case may be, on the Closing Date and shall be treated as an adjustment to the Purchase Price paid by Purchaser to Sellers on the Closing Date. If current payments with respect to items to be

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prorated pursuant to this Section 1.2.2 are not ascertainable on the Closing Date, such payments shall be prorated on the basis of the most recently ascertainable bill therefor and shall be prorated between Sellers and Purchaser within sixty (60) days after the Closing Date and a cash settlement shall be made promptly thereafter on an item by item basis.

1.2.3 Tax Election: Allocation of Purchase Price. In connection with the sale of the Newco Interests, Sellers shall, at the request of Purchaser, timely execute and deliver to Purchaser an election under Section 338(h)(10) of the Code and under any comparable provisions of state and local law with respect to the purchase of the Newco Interests (the “Section 338(h)(10) Election”). The Purchase Price and the liabilities assumed by Newco in accordance with Section 1.1.2 hereof shall be allocated among the Assets acquired hereunder in accordance with the requirements of Section 338 of the Code and the regulations thereunder, and in accordance with Schedule 1.2.3 hereto. Purchaser shall prepare a draft of any Section 338(h)(10) Election for Landry’s review at least ten (10) days prior to Closing, and shall make changes to such draft prior to Closing as are reasonably requested by Landry’s.

ARTICLE II

CLOSING ITEMS TO BE DELIVERED AND THIRD PARTY CONSENTS

2.1 Closing. The closing (the “Closing”) of the sale and purchase of the Assets shall take place on the date two (2) business days immediately following the later of the expiration or termination of applicable waiting periods under the Hart-Scott Rodino Antitrust Improvements Act of 1976 as amended (“HSR Act”) or the satisfaction or waiver of all the other conditions set forth in Article VI, at the offices of Haynes and Boone, LLP, 1221 McKinney Street, Suite 2100, Houston, Texas 77010, or on such other date and at such other place as the Parties may mutually agree. The date of the Closing is sometimes herein referred to as the “Closing Date.”

2.2 Items to be Delivered at Closing. At the Closing and subject to the terms and conditions herein contained:

(a) Sellers, Landry’s or Newco, as the case may be, shall deliver to Purchaser or confirm to Purchaser that the following have been delivered to Newco in accordance with the Restructuring, the following:

(i) certificates representing the Newco Interests, duly endorsed or accompanied by a stock power or similar instrument;

(ii) a duly executed bill of sale and assignment in form and substance reasonably acceptable to the Parties to this Agreement;

(iii) a duly executed Assignment of Trademarks and Copyrights in form and substance reasonably acceptable to the Parties to this Agreement (the “Trademark Assignment”);

(iv) a duly executed counterpart original of an assignment in respect of each of the Leases assigned to Newco as part of the Restructuring including an assignment of rights under any subordination, non-disturbance, attornment agreement, and an

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assignment of any and all right, title, interest (if any) of the applicable Seller in and to any Appurtenant Rights with respect to such Lease, in form and substance reasonably acceptable to the Parties to this Agreement (the “Lease Assignments”);

(v) a duly executed counterpart original of an undertaking whereby Newco assumes and agrees to pay, discharge or perform, as appropriate, the Assumed Liabilities in form and substance reasonably acceptable to the Parties to this Agreement (the “Assumption Agreement”);

(vi) a duly executed counterpart original Trademark License in form and substance reasonably acceptable to the Parties to this Agreement (the “Trademark License”);

(vii) a duly executed counterpart original of a Transition Services Agreement which will provide for the operations and management by Landry’s of certain parts of the Business, in form and substance reasonably acceptable to the Parties (the “Transition Services Agreement”);

(viii) a duly executed counterpart of a perpetual, royalty-free Joint Use Agreement in form and substance reasonably acceptable to the Parties to this Agreement (the “Joint Use Agreement”);

(ix) a duly executed certificate of an officer of Seller dated the Closing Date, certifying that the conditions specified in Sections 5.2.5 hereof have been fulfilled;

(x) duly executed certificates of the Secretary of each Seller and Landry’s certifying resolutions of the directors of Sellers and Landry’s approving this Agreement and the transactions contemplated hereby (together with an incumbency and signature certificate regarding the officer signing on behalf of each Seller or Landry’s, as the case may be);

(xi) copies of all of the information, files, records, data and plans belonging to Sellers which are part of the Assets;

(xii) any and all UCC-3 termination statements or amendments or other documents needed to release or transfer any Liens on, or other security interests in, the Assets, other than the Permitted Liens;

(xiii) to the extent required, duly executed Concession-Management Agreements, which will be cost neutral to Purchaser and Newco, covering those portions of the Business where a valid liquor license has not been obtained, but only to the extent such Concession-Management Agreements are permitted;

(xiv) an affidavit required by the FIRPTA in form and substance reasonably acceptable to the Parties to this Agreement (the “FIRPTA Affidavit”);

(xv) estoppel certificates with landlord consents in form and substance reasonably acceptable to the Parties to this Agreement from the landlords under the Leases set forth on Schedule 4.7 that require landlord’s consent (the “Required Consents”) to the extent such Required Consents have been received by the Closing Date;

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(xvi) a duly executed Non-Solicitation/Non-Hire Agreement in form and substance reasonably acceptable to the Parties to this Agreement;

(xvii) if not previously provided to Newco, prior to the Closing, a duly executed original of a special warranty deed, in recordable form, conveying fee simple title to each tract constituting part of the Fee Property, in form and substance reasonably acceptable to the Parties (the “Deeds”);

(xviii) a sublease for the Destin location; and

(xix) such other certificates, agreements and documents as Purchaser may reasonably request.

Simultaneously with such delivery, Sellers shall take all such steps as may be required to put Purchaser or Newco in actual possession and operating control of the Assets. Sellers will effectuate delivery of the Assets by allowing Purchaser or Newco access thereto at the Premises.

(b) Purchaser shall deliver to Sellers the following:

(i) the Purchase Price in accordance with Section 1.2.1. hereof;

(ii) a duly executed certificate of an officer of Purchaser dated the Closing Date, certifying that the conditions specified in Sections 5.1 of this Agreement have been fulfilled;

(iii) a duly executed certificate of the Secretary of Purchaser certifying (A) resolutions of the directors of Purchaser approving this Agreement and the transactions contemplated hereby (together with an incumbency and signature certificate regarding the officer signing on behalf of Purchaser, as the case may be), and (B) the certificate of formation or bylaws of Purchaser;

(iv) to the extent required, duly executed Concession-Management Agreements covering those portions of the Business where a valid liquor license has not been obtained, but only to the extent such Concession-Management Agreements are permitted;

(v) a duly executed Non-Solicitation/Non-Hire Agreement;

(vi) a duly executed counterpart of the Joint Use Agreement;

(vii) a duly executed counterpart of the Transition Services Agreement;

(viii) a duly executed Assumption Agreement; and

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(ix) an Agreement to pay to Seller $500,000 to be paid $100,000 on each of the 1st through the 5th anniversary of the Closing Date hereof in consideration of Seller’s sale of the Assets set forth in Section l.l.l(a)(ix);

(x) An Agreement to pay to Seller $1,000,000 to be paid $500,000 on each of the 6th month and 12th month anniversary of the Closing Date in consideration of Seller retaining the Liabilities set forth in Section 1.1.2(b)(vii); and

(xi) such other certificates, agreements and documents as Sellers may reasonably request.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of Sellers and Landry’s. Except as set forth in the disclosure schedule to be delivered by Landry’s and Sellers to Purchaser on the date hereof, which sets forth certain disclosures concerning Landry’s and Sellers (the “Sellers’ Disclosure Schedule”), Sellers and Landry’s hereby jointly and severally represent and warrant to Purchaser as follows: A matter disclosed in any section of Sellers’ Disclosure Schedule shall be deemed disclosed for purposes of all sections of the Sellers’ Disclosure Schedules and for each of these representations and warranties to the extent such disclosure is readily apparent to Purchaser to be relevant to, or provide the information called for by, another section of this Agreement.

3.1.1 Organization and Qualification; Subsidiaries.

(a) Landry’s and Sellers are corporations duly organized, validly existing and in good standing under the respective laws of the jurisdictions of their incorporation, except where the failure to be so organized, existing and in good standing would not reasonably be expected to have, and does not have, individually or in the aggregate, a Material Adverse Effect. Sellers have the requisite corporate power and authority necessary to own, lease and operate the Premises and to carry on the Business as it is now being conducted, and each of Landry’s and Sellers is duly qualified and in good standing to do business in each jurisdiction in which such qualification is necessary because of the nature of the business conducted by it, except where the failure to be so qualified would not have or reasonably be expected to have a Material Adverse Effect.

(b) As of the Closing, Newco will consist of a corporation or corporations duly organized, validly existing and in good standing under the respective laws of the jurisdictions of their incorporation, except where the failure to be so organized, existing and in good standing would not reasonably be expected to have, and does not have, individually or in the aggregate, a Material Adverse Effect. Newco will have the requisite corporate power and authority necessary to own, lease and operate the Premises and to carry on the Business as it is now being conducted, and will be duly qualified and in good standing to do business in each jurisdiction in which such qualification is necessary because of the nature of the business conducted by it, except where the failure to be so qualified would not have or reasonably be expected to have a Material Adverse Effect.

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3.1.2 Capitalization; Subsidiaries.

(a) Schedule 3.1.2(a) hereto sets forth, as of the date hereof, the number of shares of capital stock of Newco that are authorized, issued and outstanding and the record holders of all outstanding shares. There are no outstanding or authorized appreciation, phantom stock, profit participation, options, warrants, rights, calls, agreements or other commitments or similar rights issued by Newco with respect to equity securities of Newco or to which Newco is a party to purchase or acquire any unissued stock or other securities from Newco, and no other capital stock of Newco is reserved for any purpose. There are no contracts to which Newco is a party that relate to the Newco Interests.

(b) All of the outstanding shares of capital stock of Newco have been validly issued and are fully paid and non-assessable and are owned by Seller free and clear of all Liens.

(c) Except as set forth on Schedule 3.1.2(c), Newco does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

3.1.3 Certificate of Incorporation and By-Laws. Landry’s has heretofore made available to Purchaser a true, complete and correct copy of its Certificate of Incorporation, and its Restated By-Laws, each as amended to date, and has furnished or made available to Purchaser the Certificate of Incorporation and By-Laws (or equivalent organizational documents) of each Seller and Newco (the “Seller Documents”). Such Certificate of Incorporation, Restated By-Laws and Seller Documents are in full force and effect.

3.1.4 Authority Relative to This Agreement. Each of Landry’s and each Seller has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Landry’s and Sellers and the consummation by Landry’s and Sellers of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Landry’s and Sellers, and no other corporate proceedings on the part of Landry’s or Sellers are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Landry’s and Sellers and, assuming the due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Landry’s and Sellers enforceable against each of them in accordance with its terms subject to the effects of bankruptcy, insolvency, reorganization or similar laws of general application in effect relating to or affecting the rights of creditors, generally and to general rules of equity.

3.1.5 No Conflict; Required Filings and Consents.

(a) Except as set forth on Schedule 3.1.5(a), the execution and delivery of this Agreement by Landry’s and Sellers does not, and the performance of this Agreement by Landry’s and Sellers will not, (i) conflict with or violate the Certificate of

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Incorporation as amended and the Restated By-Laws of Landry’s or any Seller Document or (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Landry’s, Sellers or Newco or by which its or any of their respective properties is bound or affected.

(b) Except as set forth on Schedule 3.1.5(b), the execution and delivery of this Agreement by Landry’s and Sellers does not, and the performance of this Agreement by Landry’s and Sellers will not, require any consent, approval, authorization or permit of, or filing with or notification to, any national, federal, state, provincial or local governmental, regulatory or administrative authority, agency, commission, court, tribunal, arbitral body or self-regulated entity, domestic or foreign (collectively, the “Governmental Authorities”), or any other Person except for (i) applicable requirements, if any, of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and state securities laws (“Blue Sky Laws”), (ii) filings with or approvals of franchise regulatory authorities, licensing boards or agencies under applicable alcohol and beverage laws and regulations, (iii) regulatory filings related to the operation of the Business, (iv) filings under the HSR Act, (v) filings in connection with any applicable transfer or other taxes in applicable jurisdictions (vi) consents to assignment or change of control or other consents and waivers required pursuant to the Leases or Assigned Contracts or (vii) approvals to continue or transfer any existing liquor license or license to conduct restaurant operations.

3.1.6 Financial Statements.

(a) Schedule 3.1.6(a) of the Sellers’ Disclosure Schedule contains the unaudited consolidated balance sheet of the Business as of August 31, 2006 (the “Latest Balance Sheet”) and the related unaudited statements of operations for the twelve (12) month period and eight (8) month period ended on December 31, 2005 and on August 31,2006, respectively. The financial statements referred to ended December 31, 2005 in the foregoing sentence are collectively referred to as the “Financial Statements.” The Financial Statements have been prepared from the books and records of Sellers on an accrual basis consistent with Sellers’ internal accounting practices. Such Financial Statements were not prepared in accordance with GAAP, but Schedule 3.1.6(a) lists in reasonable detail each deviation from GAAP. Exhibit A-2 contains the EBITDA for the restaurants listed thereon and such EBITDA has been prepared from the books and records of Sellers consistent with past practice.

(b) The Sellers have and Newco shall have immediately prior to Closing no liabilities or obligations of any nature (including any off-balance sheet liabilities or obligations) relating to the Business except (i) as disclosed, reflected or reserved against in the Financial Statements or as set forth on Schedule 3.1.6(b). (ii) liabilities and obligations of the Sellers incurred in connection with this Agreement, as set forth on Schedule 3.1.6(b) and (iii) liabilities and obligations incurred in the ordinary course of business since the date of the Latest Balance Sheet, none of which result from, arise out of, relate to, is in the nature of, or was caused by any breach of contract or breach of warranty.

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(c) Except as set forth on Schedule 3.1.6(c), Landry’s has maintained a system of internal accounting and other controls necessary to permit preparation of financial statements in accordance with GAAP. Landry’s auditors have not notified it of any material weaknesses in internal accounting or other controls.

3.1.7 Brokers. No broker, finder or investment banker (other than North Point Advisors, the fees of whom shall be paid by Landry’s and/or Sellers) is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Landry’s or Sellers.

3.1.8 Title to and Condition of Properties. Newco has (or will have, as of the Closing, either directly or through one or more wholly-owned subsidiaries) good and marketable title to all of the Assets not consisting of Real Property, and good and indefeasible fee simple title or leasehold title to all of the Assets consisting of Real Property, free and clear of all Liens and encumbrances except for (i) those Liens set forth on Schedule 3.1.8 of Sellers’ Disclosure Schedule, (ii) mechanics’, carriers’, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of business, Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business and Liens for Taxes that are not yet due and payable or that may thereafter be paid without penalty or that are being contested in good faith by appropriate proceedings, (iii) assessments, governmental charges or levies which are not yet due and payable as of the Closing Date, (iv) other imperfections of title or encumbrances, if any, that do not, individually or in the aggregate, materially impair the value or the continued use and operation of Sellers’ assets in the conduct of the Business as presently conducted, (v) any conditions that are or would be shown by a current, accurate survey or physical inspection of any owned or leased property made prior to Closing which do not individually or in the aggregate, materially impair the value or the continued use and operation of the owned property in the conduct of the Business of the Sellers as presently conducted, (vi) zoning, building codes and other similar land use laws imposed by any governmental authority having jurisdiction over such Real Property which are not violated by the current use or occupancy of such Real Property or the operation of the Business there on, and (vii) easements, covenants, rights-of-way and other similar restrictions which do not individually or in the aggregate, materially impair the value or the continued use and operation of the owned property in the conduct of the Business of the Sellers as presently conducted (any of the items described in clauses (i) through (vii) hereof being referred to herein as “Permitted Liens”). All material assets are in reasonably good condition, ordinary wear and tear excepted.

3.1.9 Ownership of Tangible Assets. No Person other than Newco owns any equipment or other material tangible assets or properties situated on any of the Real Property, except for items disclosed on Schedule 3.1.9 of the Sellers’ Disclosure Schedule and items leased pursuant to the Assigned Contracts.

3.1.10 Contracts.

(a) Schedule 3.1.10(a) sets forth each Contract to which Landry’s, any Seller or Newco is a party to or is bound by that is used or held for use in, or that arises out of, the operation of the Assets or conduct of the Business which is not terminable without payment or penalty upon no more than ninety (90) days notice or that is of a type or category listed below (each of the Contracts being a “Material Contract”):

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(i) Contract with any employee, consultant or other service or equipment provider that provides for annual payments in excess of $100,000, unless terminable at will by the employer without payment or penalty;

(ii) Contract involving a profit sharing, deferred compensation, severance, retention, termination or loan, stock or stock option or similar plan or agreement for the benefit of any current or former employee, officer, director, or contractor of the Business;

(iii) Contract giving rise to any Funded Indebtedness;

(iv) Contracts with any labor organization, union or association;

(v) Contracts subjecting Sellers or Newco to a covenant not to compete or restricting Newco’s ability to conduct any business anywhere in the world;

(vi) leases or similar Contracts with any third party under which Sellers or Newco are a lessor or sublessor of, or makes available for use to any Person, any portion of any real property;

(vii) Contracts (including sales orders) involving the obligation of Sellers or Newco to deliver products or services for payment of more than $100,000;

(viii) franchise, management, royalty license or joint venture agreements (other than licenses for commercially available, off-the-shelf software purchased or licensed for less than a total annual cost of $10,000);

(ix) an agreement, arrangement or understanding (written or oral) with any other Person to which Sellers or Newco (i) provide capital, surplus, balance sheet or any other form of economic or financial support to such other Person; or (ii) guaranty the obligations of, or performance of any acts, by such other Person; or

(x) any agreement, Contract or commitment relating to the future disposition or acquisition of any investment in any party or of any interest in any business enterprise involving the Business or the Assets;

(xi) any Contract or commitment for capital expenditures over $25,000 calculated on a project basis or the acquisition or construction of fixed assets relating to the Business or the Premises;

(xii) any written agreement, instrument or other arrangement, or any unwritten agreement, contract, commitment or other arrangement, between or among a Seller and any of the Affiliates of Landry’s or a Seller;

(xiii) any Contract which grants to any person a preferential or other right to purchase or license any of the assets of a Seller;

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(xiv) a Contract, involving payment by a Seller of more than $100,000 other than purchase orders entered into in the ordinary course of business after the date of this Agreement and not in violation of this Agreement; or

(xv) Contract under which any Seller or Newco has advanced or loaned any other Person amounts in the aggregate exceeding $50,000, other than account receivables incurred in the ordinary course of business, consistent with past practice;

(xvi) a Contract other than as set forth above to which Sellers or Newco is a party or by which the Business or any of the Assets are bound that individually involve consideration of more than $100,000 in any calendar year.

(b) Except as set forth in Schedule 3.1.10(b) of the Sellers’ Disclosure Schedule, all Material Contracts and all Leases are in full force and effect, except to the extent the enforceability thereof may be affected by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws or general principles of equity. Except as set forth on Schedule 3.1.10(b) of the Sellers’ Disclosure Schedule, neither Landry’s nor any Seller nor Newco is (with or without the lapse of time or the giving of notice or both) in breach or default in any material respect under any Material Contract or Lease, nor will the execution or performance of this Agreement by any of them impair Purchaser’s rights under any Material Contract or Lease or alter the rights or obligations of any third party thereunder, or give to others any rights of termination, amendment, acceleration, repayment or repurchase, increased payments or cancellation under, or result in the creation of a Lien on any of the properties or assets of Purchaser or any of its Subsidiaries and, to the Knowledge of Landry’s or Sellers, no other party to any Material Contract or Lease is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder. Neither Landry’s nor any Seller has, except as disclosed in the applicable Schedule, received any written notice of the intention of any party to terminate any Material Contract or Lease. Copies of all Material Contracts (or a written summary, if oral) together with all modifications and amendments thereto, have been made available to Purchaser. Neither Sellers nor Landry’s, as applicable, is in breach or default in any material respects thereunder of any shared Assigned Contract.

3.1.11 Real Property.

(a) Leased Real Property. Except as set forth on Schedule 3.1.11(a) of the Sellers’ Disclosure Schedule, the only real property leased by Sellers in connection with the Business is the Leased Property. Landry’s or Sellers have made available to Purchaser a true and correct copy of each Lease and all amendments, extensions, guaranties and other agreements related thereto. There are no oral Contracts pursuant to which any Seller holds a leasehold or subleasehold estate in, or are granted the right to use or occupy, any land, buildings, structures, improvements, fixtures or other interest in real property which is used or intended to be used in the Business. Each Lease is legal, valid, binding, enforceable and in full force and effect and has not been assigned, modified, supplemented or amended except as has been previously provided to Purchaser. Except as set forth in Schedule 3.1.11(a), with respect to each of the Leases:

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(i) Seller’s possession and quiet enjoyment of the Leased Property under such Lease has not been disturbed, and to Seller’s Knowledge, there are no disputes with respect to such Lease; (ii) no security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach or default under such Lease which has not been redeposited in full; (iii) Seller does not, and will not in the future, owe any brokerage commissions or finder’s fees with respect to such Lease; (iv) Seller has not subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Property or any portion thereof; (v) Seller has not collaterally assigned or granted any other security interest in such Lease or any interest therein; and (vi) there are no liens or encumbrances on the estate or interest created by such Lease.

(b) Owned Real Property. Schedule 3.1.11(b) of the Sellers’ Disclosure Schedule lists all Fee Property of the Sellers constituting a portion of the Business or the Assets. With respect to each Fee Property: (A) except as set forth in Schedule 3.1.11(b) each Seller has not leased or otherwise granted to any Person the right to use or occupy any such Fee Property or any portion thereof; and (B) other than the right of Purchaser pursuant to this Agreement, there are no outstanding options, rights of first offer or rights of first refusal to purchase any such Fee Property or any portion thereof or interest therein.

(c) Leasehold Options. Except as set forth on Schedules3.l.ll(c), Sellers or Landry’s are not a party to any agreement or option to purchase any real property or interest therein relating to, or intended to be used in the operation of, the Business. Except as set forth on Schedule 3.1.11(c), there are no outstanding options, rights of first offer or rights of first refusal to purchase any Leasehold Improvements or any portion thereof or interest therein.

(d) Improvements. All buildings, structures, improvements, fixtures, building systems and equipment, and all components thereof, included in the Real Property (the “Improvements”) are in reasonably good condition and repair given their age and history of use (subject to ordinary wear and tear) and sufficient for the operation of the Business except for such matters as would not have a material adverse effect with respect to such Improvements. To the Knowledge of Sellers and Landry’s, there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any material respect with the use or occupancy of the Improvements or any portion thereof in the operation of the Business.

(e) There is no condemnation, expropriation or other proceeding in eminent domain pending or, to the Knowledge of Landry’s or any of the Sellers, threatened, affecting any Real Property or any portion thereof or interest therein.

3.1.12 Intellectual Property.

(a) Schedule 3.1.12(a) of the Sellers’ Disclosure Schedule sets forth a list of (i) registrations and applications for registration of Marks, (ii) material unregistered Marks, (iii) registrations and applications for registration of copyrights, and (iv) software, other than commercially available, (off-the-shelf) software purchased or licensed for less than a total annual cost of $10,000.

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(b) Except as set forth on Schedule 3.1.12(b), Sellers own all right, title and interest in or to, free and clear of all Liens (other than Permitted Liens), or are licensed or otherwise possess valid and legally enforceable rights to use, any and all (i) Marks embodying business goodwill or indications of origin, as they relate to the Assets of the Business, all applications, registrations and renewals in any jurisdiction pertaining to the foregoing and all goodwill associated therewith, (ii) inventions ( whether or not patentable), technology, computer programs and software (including interpretive code or source code, object code, development documentation, programming tools, drawings, specifications, data and databases) and all applications and patents in any jurisdiction pertaining to the foregoing, including re-issues, continuations, divisions, continuations- in- part, renewals or extensions, (iii) trade secrets, including confidential and other non-public information, (iv) copyrights in writings, designs, software programs, mask works or other works, applications or registrations in any jurisdiction for the foregoing and all rights related thereto; (v) Internet Web sites, domain names and applications and registrations pertaining thereto; and (vi) all tangible embodiments of any of the foregoing, in whatever form or medium, that, in the case of each of clauses (i) through (vi), are necessary for or used in the operation of the Business or the Assets (as described in clauses (i) through (v) above, collectively, “Intellectual Property”). Except with respect to the Intellectual Property that is subject to the Transition Services Agreement and the Joint Use Agreement, all of the Intellectual Property will be owned or available for use by Newco immediately after the Closing.

(c) Except as set forth on Schedule 3.1.12(c) of the Sellers’ Disclosure Schedule, to Landry’s or Sellers’ Knowledge, (i) there are no conflicts with, misappropriations of or infringements of any Intellectual Property by any third party, (ii) the conduct of the Business as currently conducted does not conflict with or infringe upon any proprietary intellectual property right of a third party, and (iii) there are no pending or, to Landry’s or Sellers’ Knowledge, threatened, claims challenging the ownership, use, validity, enforceability or registrability of any Intellectual Property, and neither Landry’s nor any Seller has received notice of any of the foregoing.

(d) Landry’s and Sellers have taken commercially reasonable steps to maintain and protect the Intellectual Property (including the confidentiality of trade secrets and compliance by Landry’s and its licensees of the Marks, and all products and services offered in connection therewith with the written standards of quality, service, production, merchandising and advertising established by Landry’s).

(e) Schedule 3.1.12(e) of the Sellers’ Disclosure Schedule sets forth a complete list of all written and, to Landry’s and Sellers’ Knowledge, oral licenses, sublicenses and other agreements in which Landry’s or any Seller has granted rights to any Person to use the Intellectual Property. Landry’s or Sellers will not, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, be in breach of any license, sublicense or other agreement relating to the Intellectual Property.

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(f) Landry’s, each Seller and Newco, as applicable, has a current fully paid license, owns or has a legal right to use each copy of any software program installed by Seller on any computer or otherwise used in the Business or included in the Assets.

3.1.13 Permits. Except as set forth on Schedule 3.1.13 of the Sellers’ Disclosure Schedule, (a) each Seller holds and is in compliance in all material respects with all material Permits required under Applicable Law for the conduct of the Business and the ownership and operation of the Assets, (b) neither Landry’s nor any Seller is in material violation of any Permits, and (c) during the past three years, no Seller has received notice of any proceedings relating to the revocation or modification of any material Permits. This Schedule does not relate to Permits required by any Environmental Law, which are the subject of Section 3.1.16.

3.1.14 Tax Matters. Except as set forth on Schedule 3.1.14 of the Sellers’ Disclosure Schedule, Landry’s and Sellers have filed (after taking into account any extensions to file) all United States federal income Tax Returns required to be filed by them prior to the Closing Date and have filed (after taking into account any extensions to file) all other federal, state, county, local and foreign Tax Returns required to be filed by them prior to the Closing Date. All such Tax Returns have accurately reflected the liability for Taxes of Sellers for the periods covered thereby, except to the extent that any inaccuracies would not be material. Sellers have paid and discharged or caused to be paid and discharged all Taxes which have become due and payable by them (except Taxes being contested in good faith and reserved against) and have made adequate provision in reserves established in their financial statement sand accounts for all Taxes which have accrued or may accrue but are not yet due and payable. All Taxes that Sellers are or were required to withhold or collect from employees, independent contractors, creditors, stockholders or other parties have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Authority or other Person. There are no liens for Taxes upon any of the Assets other than Permitted Liens. There is no pending (as to which Landry’s or any Seller has been served or received other written notification) or to Landry’s Knowledge threatened action, claim for deficiency, notice of deficiency or any other claim or investigation against any of Landry’s or the Sellers with respect to the assessment or collection of Taxes relates to the Assets. Insofar as it relates to the Business, none of Landry’s or any Sellers, nor Newco, has made any payments, nor is a party to any contract that could reasonably be expected to obligate it to make any payments, that will not be deductible under Code Section 280G.

3.1.15 Compliance with Applicable Laws. Each Seller is in compliance in all material respects with all Applicable Laws. Except as set forth on Schedule 3.1.15 of the Sellers’ Disclosure Schedule, neither Landry’s nor any Seller has received any written communication during the past two (2) years from a Governmental Authority that alleges that, insofar as it relates to the Business, the Assets or the Premises, Landry’s and Seller is not in material compliance in any respect with any Applicable Laws (including notices from local inspectors regarding material health or safety code violations) and to the Knowledge of Landry’s and Sellers, there is no basis for the issuance of any such notice or the taking of any action for such violation. This Section 3.1.15. does not relate to matters with respect to Permits, which are the subject of Section 3.1.13, Taxes, which are the subject of Section 3.1.14, or to environmental matters, which are the subject of Section 3.1.16.

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3.1.16 Compliance with Environmental Law. Except as set forth on Schedule 3.1.16 of the Sellers’ Disclosure Schedule (a) during the last three (3) years neither Landry’s nor any Seller has received any written notice from a Governmental Authority or third party that alleges that any Seller, any of the Leased Property, Real Property or Premises, or any property or facility previously owned or operated in connection with the Business are: not in compliance with any Environmental Law; are liable or potentially liable for investigation or remediation of, or natural resource damages associated with, a release or threatened release of a Hazardous Substance; or are liable or potentially liable for damages to people or property resulting from the presence or release of, or exposure to, Hazardous Substances (and neither Landry’s nor any Seller has Knowledge of any of the foregoing), (b) Sellers hold, have timely filed for any necessary renewals of, are in compliance with, and have at all times been in compliance with, in each case in all material respects, all Permits required under Environmental Laws to conduct the Business and for the ownership of the Assets, and are and for the last five(5) years have been in compliance, in all material respects, with all Environmental Laws, (c) no Seller is subject to or bound by any court decree or order or judgment relating to liabilities under or compliance with any Environmental Law, (d) no Seller has generated, treated, stored, released or disposed of, arranged for the disposal of, or otherwise placed, deposited in or located on, under or from, the Leased Property, the Real Property or the Premises, or exposed any person to, any Hazardous Substances, and neither any of the foregoing properties nor any property or facility previously owned or operated in connection with the Business is contaminated by any Hazardous Substances, except in material compliance with all Environmental Laws, in a manner that would not create liabilities under Environmental Laws, (e) neither the Business nor, with respect to the Business, any Seller has either expressly or by operation of law, assumed or undertaken any liability, including without limitation any obligation for corrective or remedial action, of any other Person relating to Environmental Laws, and (f) there are no above ground or underground tanks, asbestos-containing materials in any form or condition, materials or equipment containing polychlorinated biophenyls, or landfills, surface impoundments or disposal areas on the Leased Property, the Real Property or the Premises. The Sellers have provided to Purchaser true and correct copies of all environmental audit and assessment reports within their possession or reasonable control and all other documents materially bearing on environmental liabilities, in each case relating to the Leased Property, the Real Property, the Premises or the Business, wherever conducted.

3.1.17 Sufficiency of Assets. The Assets together with the Intellectual Property and other assets that are subject to the Transition Services Agreement constitute all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate the Business in the manner presently operated by each Seller.

3.1.18 Inventory. All items included in Inventory consist of a quality and quantity usable and saleable in the ordinary course of business of Sellers and are not excessive in kind or amount in light of such business.

3.1.19 ERISA Matters.

(a) Schedule 3.1.19(a) of the Sellers’ Disclosure Schedule sets forth a complete and correct list of each Corporation Benefit Plan. With respect to each Corporation Benefit Plan, Sellers have provided, to the extent requested, Purchaser true,

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accurate and complete copies of (i) the documents comprising each Corporation Benefit Plan (or, with respect to any Corporation Benefit Plan which is unwritten, a detailed written description of eligibility, participation, benefits, funding arrangements, assets and any other matters which relate to the obligations of Sellers or Landry’s), (ii) any related trust or other funding vehicle, (iii) any reports or summaries required under ERISA or the Code, (iv) the IRS determination letter with respect to any Corporation Benefit Plan intended to be qualified under Section 401 of the Code, (v) all summary plan descriptions and summaries of material modifications, (vi) the most recent annual report (including any schedules thereto) and (vii) the most recent audited financial statements.

(b) Sellers, Landry’s and Newco (i) do not participate in, (ii) have never participated in, and (iii) have never had a contribution obligation to and do not have any other current or potential Liability or obligation under or with respect to (A) a “Multiemployer Plan” as defined in Section 3(37)(A) or Section 4001 (a)(3) of ERISA, (B) any “Multiple Employer Plan” as defined in Sections 4063 or 4064 of ERISA or Section 413 of the Code, (C) any “Defined Benefit Plan” within the meaning of Section 3(35) of ERISA, whether or not terminated, or (D) any “multiple employer welfare arrangement” as defined in Section 3(40) of ERISA. None of the Sellers, Landry’s or Newco or any ERISA Affiliate has any current or potential Liability or obligation under Title IV of ERISA or Section 412 of the Code, including on account of a “partial withdrawal” or a “complete withdrawal” (within the meaning of Sections 4205 and 4203 of ERISA, respectively) from any Multiemployer Plan or a failure to make any required contribution to any Multiemployer Plan.

(c) Except as set forth on Schedule 3.1.19(c) of the Sellers’ Disclosure Schedule, insofar as it relates to the Business, there are no Corporation Benefit Plans with “change in control” or similar provisions, and the Closing, this Agreement and the transactions contemplated thereby and hereby will not result in any payments (whether of separation or severance pay, unemployment pay or otherwise) (i) becoming due from Sellers, Landry’s or Newco to any current or former employee, officer, director or consultant or result in the vesting, acceleration of payment or increase in the amount of any benefit payable to or in respect of any such current or former employee, officer, director or consultant, (ii) that would constitute “parachute payments” as defined in Section 280G of the Code or that would require the payment of an excise tax under Section 4999 of the Code, or (iii) that would accelerate the time of payment or vesting or increase the amount of any compensation due to, any current or former employee, officer, director or consultant.

(d) Except as set forth on Schedule 3.1.19(d) of the Seller’s Disclosure Schedule, (i) each Corporation Benefit Plan has been maintained, funded operated and administered pursuant to its terms and in material compliance with ERISA, the Code, all Applicable Laws, and any applicable collective bargaining agreements; (ii) all premium payments and contributions due and payable on or before the Closing Date in respect of any Corporation Benefit Plan have been made in full, and adequate accruals have been provided for in the Financial Statements for all other premium payments, contributions or amounts in respect of the Corporation Benefit Plans for periods ending on or before the Closing Date; (iii) no audit, action, claim, litigation, investigation, or proceeding (other

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than routine benefit claims) is pending or threatened against or relating to any Corporation Benefit Plan, or any fiduciary thereof; (iv) except as required under COBRA, Sellers, Landry’s and Newco do not provide health or welfare or welfare-type benefits for any retired or former employee, officer, director or contractor (or any dependent or beneficiary thereof) and are not obligated to provide health or welfare or other welfare-type benefits to any active employee, officer, director or contractor (or any dependent or beneficiary thereof) following such individual’s retirement or other termination of service; and (v), (A) each Corporation Benefit Plan that is an “employee pension benefit plan” as defined in Section 3(2) of ERISA has received a favorable determination letter from the IRS and is qualified in form and operation under Section 401 (a) of the Code, and each related trust, annuity contract or other funding instrument is exempt from federal income tax under Section 501 (a) of the Code, and (B) no event has occurred or circumstance exists that could reasonably give rise to disqualification or loss of tax-exempt status of any such plan or trust. Sellers, Landry’s, Newco, and the ERISA Affiliates have complied and are in compliance with the requirements of COBRA. None of Sellers, Landry’s, Newco or any other “disqualified person” (within the meaning of Section 4975 of the Code) or any “party in interest” (within the meaning of Section 3(14) of ERISA) has engaged in any “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any of the Corporation Benefit Plan which could subject any of the Corporation Benefit Plans, Sellers, Landry’s, Newco or any officer, director or employee of any of the foregoing to a penalty or tax under ERISA or the Code. No fiduciary of any Corporation Benefit Plan has any current or potential Liability or obligation for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any Corporation Benefit Plan. Newco has no current or potential Liability or obligation with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) solely by reason of being treated as a single employer under Section 414 of the Code with any other Person and does not otherwise have any current or potential Liability or obligation of any kind with respect to any benefit plan, program or arrangement, except to the extent accrued in the Working Capital as set forth in the Closing Financial Statement.

3.1.20 Employment Matters.

(a) Schedule 3.1.20(a) of the Sellers’ Disclosure Schedule as of September 25, 2006 lists (a) all management level employees (“Business Employees”) of Seller and (b) the current rates of pay or salary for each such Business Employee. Schedule 3.1.20(a) of the Sellers’ Disclosure Schedule lists each management or employment contract (including any non-competition and non-solicitation agreements) or contract for personal services and a description of any understanding or commitment between Seller and any Business Employee. True and complete copies of such contracts and descriptions of such understandings and commitments have been made available to Purchaser. Seller and/or Landry’s has taken all necessary actions to comply with the Worker Adjustment and Retraining Notification Act and any similar foreign, state or local law, regulation or ordinance (collectively, the “WARN Act”) through the Closing Date, to the extent it is subject to the WARN Act, and Purchaser shall have no disclosure or announcement obligations under the WARN Act as a result of the transactions contemplated by this Agreement. Except as set forth on Schedule 3.1.20(a) of the

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Sellers’ Disclosure Schedule, Seller does not currently have any Business Employees or to Sellers’ Knowledge any employees on an authorized leave of absence under the Uniformed Services Employment and Reemployment Rights Act of 1994, the Family Medical Leave Act of 1993 or similar laws or pursuant to any other form of authorized leave of absence with reemployment rights which is sponsored by Seller and/or Landry’s.

(b) Except as set forth on Schedule 3.1.20(b) of the Sellers’ Disclosure Schedule, no Seller is party to and has no obligation under any collective bargaining agreement or other labor union contract, white paper or side agreement with any labor union or organization, nor any obligation to recognize or deal with any labor union or organization; there are no pending or overtly threatened representation campaigns, elections or proceedings or questions concerning union representation involving any employees engaged in the Business; there are no overt or pending activities or efforts of any labor union or organization (or representatives thereof) to organize any employees engaged in the Business, nor of any demands for recognition or collective bargaining relating to any strikes, demands, slowdowns, work stoppages or lock-outs of any kind, or overt threats thereof, by or with respect to any of its employees, or any actual or claimed representatives thereof, and no such activities, efforts, demands, strikes, slowdowns, work stoppages or lock-outs occurred during the three year period preceding the date hereof; there are no known material charges or complaints involving any federal, state or local civil rights enforcement agency or court; letters from attorneys representing employees or former employees claiming any form of discrimination, wrongful discharge, tort or contract violation, complaints or citations under the Occupational Safety and Health Act or any state or local occupational safety act or regulation that could reasonably be expected to have a material adverse effect; unfair labor practice charges or complaints with the National Labor Relations Board that could reasonably be expected to have a material adverse effect; or other known claims, charges, actions or controversies pending, threatened or proposed, involving Seller and any employee, former employee or any labor union or other organization representing or claiming to represent such employees’ interests with respect to each Business Employee; Seller is and has for the last four years been in material compliance in all material respects with all laws respecting employment and employment practices, terms and conditions of employment and wages and hours, the sponsorship, maintenance, administration and operation of (or the participation of its employees in) employee benefit plans and arrangements and occupational safety and health programs; and Seller is not engaged in any violation of any laws related to employment, including unfair labor practices or acts of employment discrimination that could reasonably likely to have a material adverse effect.

3.1.21 Customary Business Practice. No Seller nor any employee, officer, director or agent of a Seller acting on behalf of such Seller has, directly or indirectly, made or authorized the making of any offer, payment or promise to pay any money or give anything of value to (a) any official or employee of a governmental body in violation of the law, (b) any political party or official thereof or any candidate for political office in violation of the law or (c) except entertainment usual or customary in the industry and gifts of nominal value, any customer, supplier or competitor of a Seller or any employee, officer or director thereof in order to assist such company in obtaining or retaining business for or with, or directing business to,

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any person, nor engaged in any other practice (including violation of any antitrust law or law regulating minority business enterprises), which would subject the Business to any damage or penalty in any civil, criminal or governmental litigation or proceeding or which would be used as the basis for termination or modification of any material contract, license or other instrument related to the Business to which Seller is a party.

3.1.22 Absence of Certain Changes or Events. Except as set forth on Schedule 3.1.22, there has not been, occurred or arisen any of the following as they relate to the Business or any of the Assets since August 31, 2006:

(a) any transaction by Landry’s or any of the Sellers except in the ordinary course of business consistent with past practice, other than the execution and delivery of this Agreement;

(b) any capital expenditure by Landry’s or any of the Sellers other than in the ordinary course of business, and Landry’s has not failed to make or to cause each Seller and Newco to make capital expenditures consistent with past practice;

(c) any change in, or any event, condition or state of facts of any character peculiar to the Assets or the operation of the Business that individually or in the aggregate materially and adversely affects the Business or the Assets or that affects the validity or enforceability of this Agreement;

(d) any destruction, damage or loss suffered by the Business or with respect to any Asset (whether or not covered by insurance);

(e) any increase in the salary or other compensation, including all wages, salary, deferred payment arrangements, bonus payments and accruals, profit sharing arrangements, payment in respect of stock or equity options or phantom stock or equity options or similar arrangements, stock appreciation rights or similar rights, incentive payments, pension or employment benefit contributions or similar payments, payable or to become payable by Landry’s, any of Sellers or Newco to any current or former officers, directors or employees of the Business, or the declaration, payment or commitment or obligation of any kind for the payment by Landry’s, any of the Sellers or Newco of a bonus or increased or additional salary or compensation to any such person other than in the ordinary course of business, consistent with past practices;

(f) any sale, lease or other disposition of any Asset, material to the conduct of the Business, other than Inventories in the ordinary course of business consistent with past practice;

(g) any mortgage, pledge or other encumbrance of any Asset;

(h) any forgiveness of any debt owed to Landry’s or any of the Sellers;

(i) any amendment or termination (or notice of termination) of any contract, agreement, Lease or license to which the Business or any of the Assets are subject;

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(j) any breach of the terms of any contract or agreement that is material to the Business;

(k) any commencement, notice of commencement or, to the Knowledge of Landry’s or any of the Sellers, threat of commencement or settlement or other resolution of any injunction, decree, order, writ or judgment outstanding, nor any claims, litigation, administrative actions or any governmental proceeding against or investigation (collectively “Proceedings”) of Landry’s or any of the Sellers as it relates to the Business or the Assets;

(1) any liabilities that have not been disclosed in the Financial Statements or on Schedule 3.1.6(b) other than those incurred in the ordinary course of business none of which result from, arise out of, relate to, is in the nature of, or was caused by any breach of contract or breach of warranty;

(m) any waiver or release of any right or claim of Landry’s or any of the Sellers as it relates to the Business or the Assets;

(n) any receipt of a claim of wrongful discharge, discriminatory discharge, on the job injury, involuntary terminations, or other unlawful labor practice or action;

(o) any transactions by Landry’s as it relates to the Business or the Assets or any of the Sellers with an Affiliate or related party other than in the ordinary course of business, consistent with past practices;

(p) any change by Landry’s or any of the Sellers in accounting methods or principles applicable to the Business or the Assets, other than as may be disclosed in the Financial Statements;

(q) any change by Landry’s or any of the Sellers in its historical practices with respect to cash management, maintenance of Working Capital and equipment or payment of account and trade payables as it relates to the Business or the Assets;

(r) any borrowing of funds, agreement to borrow funds or guaranty by Landry’s, any of the Sellers or Newco affecting or relating to the Business or the Assets, or any termination or amendment of any evidence of indebtedness, contract, agreement, deed, mortgage, lease, license or other instrument to which Landry’s, any of the Sellers or Newco is bound or by which any of the Assets are bound or to which any of the Assets are subject, other than in the ordinary course of business consistent with past practices;

(s) any acquisitions of any assets, equipment or inventory outside the ordinary course of business;

(t) any entry into any commitment of any kind or the occurrence of any event known to the Landry’s or any of the Sellers which could give rise to any contingent liability not covered by the foregoing that could have a material and adverse effect on the Assets or the Business;

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(u) the termination of any employee that has a written employment agreement with Landry’s or any of the Sellers; or

(v) any contract, commitment or agreement, oral or written, to do any of the foregoing.

3.1.23 Absence of Defaults. Except as set forth on Schedule 3.1.23, (i) Landry’s, Sellers and Newco have performed in all material respects all obligations required to be performed by them under any agreement or instrument to which any of them is a party or by which any of them is bound that relates to or would materially affect the Business or by or to which any of the Assets are bound or subject or that could materially adversely affect the ability of Landry’s or any of the Sellers to consummate the transactions contemplated herein and are not in breach or default thereunder and (ii) no condition exists or event has occurred that (whether with or without notice or lapse of time or both) would constitute material breach or default of by Landry’s, any Seller or Newco, or to the Knowledge of Landry’s, any other party thereto, or permit termination, modification, or acceleration thereunder.

3.1.24 Insurance. Schedule 3.1.24 sets forth a true and complete list of all insurance policies of any kind or nature (including self insurance) covering Landry’s and the Sellers with respect to the Business and the Assets, including policies of life, fire, theft, employee fidelity, worker’s compensation, property and other casualty and liability insurance, and indicates the type of coverage, name of insured, the insurer, the expiration date of each policy and the amount of coverage for statutory workers’ compensation policy or any substitute or alternative workers’ compensation benefit arrangement. Schedule 3.1.24 also sets forth a list of any currently pending claims and a loss run for the last three (3) years. The insurance afforded under such policies is in full force and effect and will continue to cover Landry’s and the Sellers with respect to the Business and the Assets through the Closing, and all premiums due and owing on such policies have been paid or will be paid prior to the Closing. Since January 1,2004, there are not historical gaps in insurance coverage. Current coverage limits are not significantly diminished as a result of claims paid. Since January 1, 2005, neither Landry’s nor any Seller has received any written notice of cancellation or nonrenewal of any insurance policy. True and complete copies of each such policy have been made available to Purchaser.

3.1.25 Regulatory Filings. Landry’s and the Sellers have filed all reports, statements, documents, registrations, filings or submissions required, in connection with the operation of the Business or the Assets, to be filed by Landry’s or the Sellers with any governmental body. All such filings complied in all material respects with applicable laws when filed and no material deficiencies have been asserted by any such regulatory authority with respect to such filings or submissions.

3.1.26 Suppliers. Schedule 3.1.26 lists the twenty (20) largest suppliers (measured by dollar volume of purchases or sales in each case) of the Sellers and dollar volume related to the Business and the Assets during the twelve (12) months prior to June 30, 2006 (each a “Significant Supplier”). Except as set forth in Schedule 3.1.26, in the twelve (12) months prior to the date hereof, no Significant Supplier has terminated its relationship with Landry’s or any Seller or materially decreased the level of its sales, and neither Landry’s nor any Seller has received any written (or to Landry’s’ Knowledge, verbal) notice that any Significant Supplier intends to terminate its relationship with any Seller or materially decrease the level of its sales to any Seller.

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3.1.27 Affiliate Transactions. Except for compensation paid for employee services rendered in the ordinary course of business, or the transactions contemplated by this Agreement as set forth in the Transition Services Agreement, the Trademark License Agreement or the Joint Use Agreement or as set forth on Schedule 3.1.27, Newco is not owed any amount from, owes no amount to, does not guarantee any amount owed by, has no Contracts with and has no commitments to: (a) Landry’s or any Seller, (b) any employee, officer or director of Landry’s or any Seller or any member of a family group of any of the foregoing or (c) any Affiliate. Except as set forth on Schedule 3.1.27, no officer or director of Landry’s, Sellers or Newco has any direct or indirect interest in any Person having business dealings with or who is party to any Contract with Newco.

3.1.28 Litigation. Except as set forth on Schedule 3.1.28 of Sellers’ Disclosure Schedule, there are not any (a) outstanding judgments against Landry’s, any Seller or Newco, (b) Proceedings pending or, to the Knowledge of Sellers, threatened against Landry’s, any Seller or Newco or (c) investigations by any Governmental Authority that are, pending or to the Knowledge of Sellers, threatened against Landry’s, any Seller or Newco that, in any case, individually or in the aggregate, would materially impair the ability of Landry’s, any Seller or Newco to perform its obligations under this Agreement.

3.2 Representations and Warranties of Purchaser. Except as set forth in the Disclosure Schedules to be delivered by Purchaser to Sellers and Landry’s on the date hereof, which sets forth certain disclosures concerning Purchaser and its business (the “Purchaser’s Disclosure Schedule”), Purchaser represents and warrants to Seller and Landry’s as follows: A matter disclosed in any section of Purchaser’s Disclosure Schedule shall be deemed disclosed for purposes of all sections of the Purchaser’s Disclosure Schedules and for each of these representations and warranties to the extent such disclosure is readily apparent to Landry’s and Sellers to be relevant to, or provide the information called for by, another section of this Agreement.

3.2.1 Organization and Qualification. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, except where the failure to be so organized, existing and in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Purchaser has the requisite corporate power and authority and is in possession of all approvals necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted.

3.2.2 Authority Relative to This Agreement. Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Purchaser, and the consummation by Purchaser of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary limited liability company action on the part of Purchaser, and no other limited liability company proceedings on the part of Purchaser are necessary to authorize this Agreement, the

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Financing Documents or to consummate the transactions contemplated hereby or thereby. This Agreement has been duly and validly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery by Landry’s and Sellers, constitutes a legal, valid and binding obligation of Purchaser enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, reorganization or similar laws of general application in effect relating to or affecting the rights of creditors, generally and to general rules of equity.

3.2.3 No Conflict, Required Filings and Consents.

(a) The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser will not, (i) conflict with or violate the Limited Liability Company Agreement of Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Purchaser or any of its Subsidiaries or by which its or their respective properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or modification in a manner materially adverse to Purchaser or its Subsidiaries of any right or benefit under, or impair Purchaser’s or any of its Subsidiaries’ rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration, repayment or repurchase, increased payments or cancellation under, or result in the creation of a Lien on any of the properties or assets of Purchaser or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Purchaser or any of its Subsidiaries or its or any of their respective properties are bound or affected.

(b) The execution and delivery of this Agreement by Purchaser does not, and the performance of this Agreement by Purchaser will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except for (i) applicable requirements, if any, of the Securities Act, the Exchange Act, the Blue Sky Laws, and filings under the HSR Act, to the extent applicable, and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not (a) prevent or materially delay consummation of the transactions contemplated hereby, (b) otherwise prevent or materially delay Purchaser from performing its respective obligations under this Agreement or (c) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

3.2.4 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Purchaser.

3.2.5 Financing. Schedule 3.2.5 describes in detail all of Purchaser’s sources of equity, debt and other financing for the transactions contemplated by this Agreement, and attached to Schedule 3.2.5 are copies of all debt commitment letters and other documents of commitment and related documents for such debt financing (but not any fee letter relating thereto) (the “Debt Commitment Letters”) and copies of all equity commitment letters for such equity financing (with language making Sellers third party beneficiaries of such commitment

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letters) (the “Equity Commitment Letter” and collectively with the Debt Commitment Letter, the “Commitment Letters”), including binding commitment letters from any bank or other financial institution providing any such financing.

3.2.6 Solvency. Purchaser is not insolvent nor will be rendered insolvent by any of the transactions contemplated by this Agreement. As used in this section, “insolvent” means that the sum of the debts and other liabilities of such party exceed the fair market value of such party’s assets after the consummation of the transactions contemplated by this Agreement. Immediately after giving effect to the consummation of the transactions contemplated by this Agreement, Purchaser (i) will be able to pay their respective liabilities as they become due; and (ii) will have their respective assets (calculated at fair market value) that exceed their respective liabilities.

3.2.7 Litigation. Except as set forth on Schedule 3.2.7 of Purchaser’s Disclosure Schedule, there are not any (a) outstanding judgments against Purchaser, (b) proceedings pending or, to the Knowledge of Purchaser, threatened against Purchaser or (c) investigations by any Governmental Authority that are, pending or to the Knowledge of Purchaser, threatened against Purchaser that, in any case, individually or in the aggregate, would materially impair the ability of Purchaser to perform its obligations under this Agreement.

3.2.8 No Implied Representations and Warranties. THE PURCHASER ACKNOWLEDGES THAT, EXCEPT AS PROVIDED IN THIS ARTICLE III, AND ABSENT FRAUD OR INTENTIONAL MISREPRESENTATION, LANDRY’S AND SELLERS HAVE NOT MADE ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, OF ANY KIND OR NATURE REGARDING THE ASSETS, THE PREMISES OR THE BUSINESS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III, PURCHASER EXPRESSLY TAKES THE ASSETS ON AN “AS-IS”, “WHERE-IS” AND “WITH-ALL-FAULTS” BASIS, WITHOUT ANY WARRANTIES, WHETHER EXPRESS OR IMPLIED (INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE).

ARTICLE IV

AGREEMENTS

4.1 Conduct of Business.

(a) Unless Purchaser shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed, and except as otherwise contemplated by this Agreement or any document executed in connection with the transactions contemplated by this Agreement, during the period commencing on the date of this Agreement and terminating on the Closing Date, Landry’s shall, and shall cause the Sellers and Newco to, (i) conduct the Business in the ordinary course consistent with past practices, and (ii) use commercially reasonable efforts consistent with past practices and policies to (a) preserve the relationships of the Business with customers, suppliers, employees and others with whom the Sellers and each of the Subsidiaries deal, and (b)

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maintain the Assets, the Premises and the Business in their current condition, normal wear and tear excepted , and shall not demolish or remove any of the existing Improvements, or erect new improvements on the Real Property or any portion thereof or remove from the Premises any of the other Assets currently located on the Premises.

(b) Without limiting the generality of the foregoing paragraph (a), neither Landry’s nor any Seller will insofar as it relates to the Business or the Assets:

(i) make any capital expenditures or incur any expenses, including maintenance, repairs, replacements except in the ordinary course of business or make any commitment to make capital expenditures in excess of $ 1,000,000 in the aggregate, provided, however, if Purchaser withholds its consent to such capital expenditures, failure to make or to commit to make such capital expenditure shall not be considered a breach of any representation or warranty;

(ii) voluntarily incur any material liability or obligation, sell, transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any of the Assets or properties (real, personal or mixed) material to the Business in any case other than in the ordinary course of business consistent with past practice and in no event in excess of $100,000 individually and $500,000 in the aggregate; provided, however, that (1) Sellers and Landry’s shall not sell, assign or otherwise transfer any of the Real Property, and (2) Sellers or Landry’s may sell, assign or otherwise transfer any of the Excluded Assets and Excluded Liabilities;

(iii) increase in any manner the salary or other compensation, including all wages, salary, deferred payment arrangements, bonus payments and accruals, profit sharing arrangements, payment in respect of stock or equity options or phantom stock or equity options or similar arrangements, stock appreciation rights or similar rights, incentive payments, severance payments, pension or employment benefit contributions or similar payments, payable or to become payable by Landry’s or any of Sellers to any (x) employees set forth on Schedule 4.l (b) (iii) or (y) any other employee, or the declaration, payment or commitment or obligation of any kind for the payment by Landry’s or any of the Sellers of a bonus or increased or additional salary or compensation to any such person other than, with respect to the persons set forth in clause (y) in the ordinary course of business, consistent with past practices;

(iv) commit or omit to do any act which act or omission would cause a material breach of any covenant contained in this Agreement or would cause any representation or warranty contained in this Agreement to become materially untrue, as if each such representation and warranty were continuously made from and after the date hereof;

(v) fail to maintain its books, accounts and records in the usual manner on a basis consistent with that heretofore employed;

(vi) materially increase or decrease the restaurant, inventory or house bank accounts in any restaurant;

(vii) enter into, terminate, extend, renew or amend any Contract, Lease, sublease, license or other agreement to which the Business or any of the Assets are

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subject, except that Landry’s or Sellers may enter into, terminate or amend any Contract for the purchase of Inventory or for any catered event, in the ordinary course of business consistent with past practice but in no event shall any terms, including pricing and payment terms, be terminated, extended, renewed, amended or otherwise modified in any manner adverse to Purchaser, Newco or the Business with respect to any Lease or any agreement with a Significant Supplier;

(viii) to its Knowledge, allow any employee or other Person to remove any Asset, including, without limitation, any Asset consisting of artwork, brochures, signage, testimonials, advertising, display, proprietary asset, retail item or other property from the Premises other than in connection with the performance of employment responsibilities in the ordinary course of business, consistent with past practices;

(ix) discharge any obligations (including accounts payable and sales tax) other than on a timely basis in the ordinary course of business consistent with past practice or delay or defer the payment of any accounts payable beyond the date such payable has historically been paid in the ordinary course;

(x) sell, give away, abandon, fail to maintain or otherwise dispose of any Inventory, other than in the ordinary course of business consistent with past practice; or

(xi) authorize any of, or agree to commit to do any of, the foregoing actions; or

(xii) cease to provide coverage under any group health plan (as defined in Section 5000(b) of the Code, Section 607 of ERISA, or both) which provides welfare benefits to any current or former employee (or any dependent or beneficiary thereof) of the Business, in connection with the sale (as such phrase is described in Section 54.4980B-9, Q&A-8 of the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as those regulations may be amended from time to time (including corresponding provisions of succeeding regulations), whether or not such regulations apply to this Agreement) of the Assets, and the Business as described in this Agreement.

(c) Landry’s or Sellers shall use commercially reasonable efforts to comply with all Applicable Laws and maintain in full force and effect all Permits necessary for, or otherwise material to, such business.

(d) Landry’s and Sellers shall administer each Corporation Benefit Plan, or cause the same to be so administered, in all material respects in accordance with the applicable provisions of the Code, ERISA and all other Applicable Laws. Landry’s and Sellers will promptly notify Purchaser in writing of any receipt by Sellers or Landry’s (and furnish Purchaser with copies) of any notice of proceeding threatened or initiated by any Person involving any Corporation Benefit Plan to the extent such proceeding would result in the imposition of any Lien on the Assets.

4.2 Update Schedules. Sellers shall promptly disclose to Purchaser any information contained in its representations and warranties herein or the Schedules hereto which, because of an event occurring after the date hereof, is incomplete or is no longer correct as of all times after

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the date hereof until the Closing Date; provided, however, that none of such disclosures shall be deemed to modify, amend or supplement the representations and warranties of Sellers herein or the Schedules hereto for the purposes of Section 5.1.1 hereof, unless Purchaser shall have expressly consented to such modification in writing.

4.3 Maintenance of Insurance. Landry’s and Sellers shall maintain in full force and effect all of its presently existing insurance coverage described in Schedule 3.1.24 hereto, or insurance comparable to such existing coverage.

4.4 Confidentiality. Each Party acknowledges that such Party has had, and may from time to time have, access to confidential records, data, customers lists, trade secrets and other confidential information owned or used by each other Party or any Subsidiary or Affiliate thereof (each, an “Interested Party”) in the course of its business (the “Confidential Information ”).Accordingly, each Party agrees (a) to hold all Confidential Information in strict confidence, (b) not to disclose Confidential Information of any Interested Party to any Person (except to such Interested Party or any Affiliate, employee, agent or representative thereof), and (c) not to use, directly or indirectly, any of such Confidential Information of any Interested Party for any competitive or commercial purpose; provided, however, that each Party may disclose Confidential Information to its Affiliates’, officers, directors, employees, agents, financing sources, accountants and attorneys if such Persons agree to comply with this Section 4.4; and provided, further, that, notwithstanding anything to the contrary contained herein, no Party shall be subject to any of the limitations set forth above with respect to any Confidential Information which (i) is now, or hereafter becomes, through no act or failure to act on the part of such Party that constitutes a breach of this Section 4.4, generally known or available to the public, (ii) is hereafter furnished to such Party by a third party, who, to the knowledge of such receiving Party, is not under any obligation of confidentiality to the related Interested Party, (iii) is disclosed with the written approval of the related Interested Party, (iv) is required to be disclosed by law (including securities law), court order or similar compulsion (provided that in such event the Party required to disclose shall give prompt notice to the other Parties so that any Interested Party may contest such law, order or compulsion), (v) is required or is reasonably necessary to be provided pursuant to or in connection with any Proceeding involving the Parties hereto, or (vi) is independently developed by employees or agents of such Party and/or its, his or her Affiliates which or who have had no access to the relevant portions of the Confidential Information.

4.5 Commercially Reasonable Efforts.

(a) Landry’s and Sellers shall promptly make all filings and seek to obtain all authorizations (including, without limitation, all filings required under the HSR Act) required under all Applicable Laws with respect to this Agreement and the transactions contemplated hereby and will reasonably consult and cooperate with each other with respect thereto. Landry’s and Sellers will use their commercially reasonable efforts to make such filings by October 12, 2006. Landry’s and Sellers shall not take any action (including effecting or agreeing to effect or announcing an intention or proposal to effect, any acquisition, business combination or other transaction) which would impair the ability of the Parties to consummate the transactions contemplated hereby; and use their commercially reasonable efforts to promptly (x) take, or cause to be taken, all other actions and (y) do, or cause to be done, all other things reasonably necessary, proper or

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appropriate to satisfy the conditions set forth in Article V (unless waived) and to consummate and make effective the transactions contemplated by this Agreement on the terms and conditions set forth herein (including seeking to remove promptly any injunction or other legal barrier that may prevent such consummation). Sellers shall promptly notify Purchaser of any communication to that party from any Governmental Authority in connection with any required filing with, or approval or review by, such Governmental Authority in connection with this Agreement and the transactions contemplated hereby and permit Purchaser to review in advance any proposed communication to any Governmental Authority in such connection to the extent permitted by Applicable Law.

(b) Landry’s and Sellers shall reasonably cooperate with, and direct their officers, employees, and accountants necessary to assist in the consummation of the financing associated with this Agreement to reasonably cooperate with, Purchaser, its financing sources and their respective representatives in connection with such financing. Following Closing, Purchaser shall have the right to request Landry’s auditors to conduct an audit of the Business’ financials for a period of up to three years. If requested by Purchaser, Landry’s shall provide or cause to be provided to Purchaser any financial information and other information as reasonably requested in connection with are registered initial public offering or other capital market transaction. Sellers and Landry’s agree to reasonably cooperate in the conduct of such audit and use commercially reasonable efforts to cause Landry’s auditors to take such actions as Purchaser may reasonably request in connection with the audit. Landry’s shall request the auditors to complete such audit in a timely fashion, and Landry’s shall use commercially reasonable efforts to cause such audit to be completed within such time. All costs and expenses associated with such audit, including but not limited to audit fees charged by Landry’s auditors, shall be Purchaser’s sole responsibility.

(c) Landry’s and each Seller shall reasonably cooperate at Purchaser’s expense with Purchaser’s efforts in obtaining any title policies and surveys reasonably required by Purchaser’s lenders, including reasonable efforts to remove from title any Liens, except Permitted Liens, and Sellers shall provide Purchaser’s title company (the “Title Company”) with any reasonable and customary affidavit requested by the Title Company to issue such title policies; provided, however, that the foregoing shall not require Sellers or Landry’s to incur any costs nor shall the foregoing delay Closing nor be considered a condition precedent to Closing.

4.6 Access to Information and Personnel. Landry’s and each of the Sellers shall afford to officers, employees, counsel, accountants and other authorized representatives of Purchaser (“Purchaser Representatives”) reasonable access, during normal business hours throughout the period prior to the Closing Date, to its properties, books and records, such access not to unreasonably interfere with Sellers’ business or operations, and, during such period, shall furnish promptly to such Purchaser Representatives all information concerning the Business, Premises, Assets and personnel as may reasonably be requested; provided, however, that access to any of the Premises which constitute a part of the Business and discussions with any landlord under any Lease or any of Sellers’ lenders shall be scheduled in advance with, and subject to the prior approval, not to be unreasonably withheld, conditioned or delayed, of the Chief Executive

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Officer or President of Landry’s, and Landry’s shall have an opportunity to participate in such discussions. Purchaser acknowledges Landry’s interest that the Purchaser Representatives’ investigations be as discreet as possible and not unduly disrupt the operations of Sellers, and Purchaser will work diligently to complete the Purchaser Representatives’ investigations in a timely manner. Nothing contained in this Agreement shall give Purchaser, directly or indirectly, the right to control or direct the Business prior to the Closing.

4.7 Landlord Consents.

(a) Landry’s and each of the Sellers shall undertake good faith commercially reasonable efforts to obtain estoppel certificates with landlord consents in form and substance reasonably satisfactory to the Parties from the landlord under each of the Leases where such landlord’s consent is required as a condition to the assignment thereof, which such Leases are set forth on Schedule 4.7.

(b) Sellers, Landry’s and Purchaser agree that, in the event that Newco does not receive the 30 Required Consents listed on Exhibit A-2 prior to the Closing, Seller will use commercially reasonable efforts, to the extent that it may lawfully do so, to (i) cooperate in any reasonable and lawful arrangement designed to provide Newco with the rights and benefits of the Leases, and (ii) enforce, at the request and for the account of Newco, any rights of Seller arising from such rights or benefits. Notwithstanding any provision to the contrary herein, Newco will perform and pay for the benefit of the other party or parties thereto, the obligations of any Seller, Landry’s or any of their Affiliates under or in connection with any such rights or benefits provided to Newco under such Leases, and will indemnify and hold Seller, Landry’s and their Affiliates harmless from any Losses relating to, resulting from or arising out of any failure by Newco to perform and pay such obligations.

(c) Notwithstanding the foregoing, in the event the failure of Seller to obtain any of the 30 Required Consents listed on Exhibit A-2 results in Newco or Seller being placed in default under any applicable Lease after the Closing Date by reason of the landlord having refused to consent to the transactions contemplated by this Agreement, the Party to whom notice is given shall promptly notify the other. During the cure period set forth in the applicable Lease, if any, Landry’s shall use commercially reasonable efforts to obtain the Landlord’s consent. If Landry’s has not obtained such consent within five (5) days prior to the end of the cure period set forth in such Lease, if any, Purchaser can notify Landry’s either: (i) that it desires to have Landry’s repurchase the applicable Lease (the “Lease Repurchase Obligation”); or (ii) that it has determined to remain in the Premises and that it will waive Landry’s Lease Repurchase Obligation; or (iii) that it is unable to make a decision without additional time, not to exceed forty-five (45) days. If Purchaser fails to notify Landry’s at least three (3) days before the end of the cure period with respect to any of the foregoing options, option (iii) shall be deemed to have been made. If the decision set forth in option (iii) is made, Purchaser and Landry’s shall use good faith commercially reasonable efforts to arrive at a procedure for maintaining the Parties’ rights under the Lease during any applicable cure period, Purchaser shall elect either option (i) or option (ii). To the extent Purchaser elects option (i), Purchaser shall use good faith commercially reasonable efforts, to take such steps, to

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the extent it may lawfully do so, at Landry’s option, to put Landry’s into possession of such premises within any applicable cure period; provided that in no event shall Purchaser be required to unwind the transactions contemplated hereby. If Purchaser elects to have Landry’s repurchase the applicable Lease, Landry’s shall be required to repurchase the applicable Lease from Purchaser at a price equal to the positive EBITDA for such premises for the twelve months ended August 31, 2006, as set forth on Exhibit A-2 multiplied by 5.5 (the “EBITDA Repurchase Price”). Landry’s shall be solely responsible for all obligations under such Lease upon the repurchase pursuant to the Lease Repurchase Obligation and at such time Purchaser shall have no Liability or obligation with respect to such Lease. To the extent Landry’s has repurchased three (3) Leases pursuant to the Lease Repurchase Obligation, all subsequent Lease repurchases shall be at a price equal to 95.7% of the EBITDA Repurchase Price, provided, however, that if more than three (3) Leases are subject to the Lease Repurchase Obligation, the three stores with the highest EBITDA shall be acquired at the EBITDA Repurchase Price, and all others shall be acquired at 95.7% of the EBITDA Repurchase Price (and the determination of which stores are the three highest may change from time to time).

4.8 Termination of Affiliate Transactions. As of or prior to the Closing, Landry’s Sellers and Newco will cause the Contracts with Affiliates listed on Schedule 4.8 to be terminated.

4.9 Bank Accounts; Lock boxes. Landry’s shall cause Newco to establish bank accounts and lock boxes at least ten (10) business days prior to the Closing Date that substantially mirror the Business’ existing bank accounts and lock boxes.

4.10 Reciprocal Easement. As of or prior to the Closing Landry’s and Newco shall have entered into a reciprocal easement agreement providing for mutual reciprocal easements for ingress, egress and such other matters between such Fee Properties listed on Schedule 4.10 and the respective adjacent tract owned (or to be owned) by Landry’s or its Affiliate, in form and substance reasonably acceptable to the Parties to this Agreement.

4.11 Private Clubs. All officers of any private club operated by Sellers shall resign at Closing and be replaced by such Business Employees selected by Purchaser.

4.12 Egyptian Deposit. To the extent The Egyptian Company for Modern Restaurant Management opens a Joe’s Crab Shack restaurant pursuant to the Joe’s Crab Shack Franchise Agreement between Landry’s Trademark, Inc. and the Egyptian Company for Modern Restaurant Management, dated January 30, 2006, Landry’s shall pay, within ten (10) business days of Purchaser or Newco giving Landry’s notice of such restaurant opening, by wire transfers $100, 000 to Newco.

4.13 Rancho Cucamonga. Landry’s will, or will cause Newco to, timely notify the landlord under the Lease with respect to the Rancho Cucamonga, CA restaurant in accordance with the certain lease dated January 27, 2005, of the transactions contemplated in this Agreement, if necessary, that Newco assumes in writing all of the tenants obligations under such Lease and will timely submit a written assumption of the obligations under the Lease in accordance with the terms of the Lease.

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ARTICLE V

CONDITIONS PRECEDENT TO THE CLOSING

5.1 Conditions Precedent to Purchaser’s Obligations. The obligations on the part of the Purchaser to consummate the transactions to be consummated at the Closing pursuant to this Agreement are subject to the satisfaction at or prior to the Closing of each of the conditions set forth in this Section 5.1, any of which may be waived by Purchaser in its sole discretion.

5.1.1 Representations and Warranties True as of the Closing Date. The representations and warranties of Sellers and Landry’s contained in this Agreement or in any list, certificate or document delivered by Sellers or Landry’s to Purchaser pursuant to the provisions hereof shall be true in all material respects on the Closing Date with the same effect as though such representations and warranties were made as of such date; provided, however, that any representation or warranty which is qualified by materiality shall, with regard to the portion so qualified, be true and correct in all respects.

5.1.2 Compliance with this Agreement. Sellers and Landry’s shall have performed and complied with, in all material respects, all agreements, covenants and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing, including, without limitation, delivery to Purchaser of all of the items to be delivered by Sellers pursuant to Section 2.2(a) of this Agreement.

5.1.3 No Injunctions or Restraints. On the Closing Date, no injunction, restraining order or other order or legal restraint or prohibition issued by any Governmental Authority shall be in effect which would prevent the consummation of the transactions contemplated by this Agreement or materially interfere with the Purchaser’s ability to own the Assets and operate the Business and no Governmental Authority shall have initiated proceedings to seek to impose any such restraint.

5.1.4 Non-Solicitation/Non-Hire Agreements. Purchaser, Sellers and Landry’s shall have entered into an eighteen month non-solicitation non-hire agreement in form and substance reasonably acceptable to the Parties to this Agreement (the “Non-Solicitation/Non-Hire Agreement”) providing that the non-hire covenant shall not apply to any employee whose employment has been terminated for more than sixty (60) days.

5.1.5 Consents and Approvals - HSR. Any waiting period (and any extension thereof) under the HSR Act applicable to the transactions contemplated hereby shall have expired or been terminated. Landry’s shall use commercially reasonable efforts to obtain vendor consents to any material vendor contract. In the event Landry’s is unable to obtain any such consent, Landry’s will continue to provide such product to Purchaser under the Transition Services Agreement to the extent providing such product will not be a breach of contract or law by Landry’s or Seller.

5.1.6 No Material Adverse Change. There shall have been no change in respect of the Business or the Assets resulting in a Material Adverse Effect (or changes which in the aggregate result in a Material Adverse Effect) since the date hereof.

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5.1.7 Financing. Purchaser shall have received the proceeds of the financings contemplated by the Debt Commitment Letters on substantially the same terms and conditions set forth in the Debt Commitment Letters (but allowing for all changes contemplated in such Debt Commitment Letters).

5.1.8 Restructuring. Landry’s, Sellers and Newco shall have completed the Restructuring in accordance with and subject to the terms and conditions contained herein.

5.2 Conditions Precedent to the Obligations of Seller and Landry’s. The obligations on the part of the Sellers and Landry’s to consummate the transactions to be consummated by each of them at the Closing pursuant to this Agreement are subject to the satisfaction at or prior to the Closing of each of the conditions set forth in this Section 5.2, any of which may be waived by the Sellers and Landry’s in their sole discretion.

5.2.1 Representations and Warranties True as of the Closing Date. The representations and warranties of Purchaser contained in this Agreement or in any list, certificate or document delivered by Purchaser to Sellers or Landry’s pursuant to the provisions hereof shall be true in all material respects on the Closing Date with the same effect as though such representations and warranties were made as of such date; provided, however, that any representation or warranty which is qualified by materiality shall, with regard to the portion so qualified, be true and correct in all respects.

5.2.2 Compliance with this Agreement. Purchaser shall have performed and complied with, in all material respects, all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing including, without limitation, delivery to Sellers of all of the items to be delivered by Purchaser pursuant to Section 2.2(b) of this Agreement.

5.2.3 No Injunctions or Restraints. On the Closing Date, no injunction, restraining order or other order or legal restraint or prohibition issued by any Governmental Authority shall be in effect which would prevent the consummation of the transactions contemplated by this Agreement.

5.2.4 Non-Solicitation/Non-Hire Agreements. Purchaser, Sellers and Landry’s shall have entered into the Non-Solicitation/Non-Hire Agreements.

5.2.5 HSR Approval. Any waiting period under the HSR Act applicable to the transactions contemplated hereby shall have expired or been terminated.

ARTICLE VI

INDEMNIFICATION

6.1 Indemnification by Sellers and Landry’s. Except as otherwise limited by this Article VI, Sellers and Landry’s, jointly and severally, shall indemnify and hold harmless Purchaser and its Affiliates and each of their respective officers, directors, shareholders, members, partners, successors and permitted assigns from any and all liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses) suffered or incurred by any of them (hereinafter “Purchaser Losses”), arising out of or resulting from:

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(a) the breach of any representation, warranty, covenant or agreement by Sellers or Landry’s contained herein or in any exhibit, schedule or certificate delivered under this Agreement;

(b) Title IV of ERISA or Newco being considered at any time prior to the Closing a single employer under Section 414 of the Code with any other Person; or

(c) the Excluded Liabilities.

6.2 Indemnification by Purchaser. Except as otherwise limited by this Article VI, Purchaser and, subsequent to the Closing, Newco and each of Newco’s subsidiaries, jointly and severally, shall indemnify and hold harmless Sellers, Landry’s and their Affiliates and each of their respective officers, directors, successors and permitted assigns from any and all liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses) suffered or incurred by any of them (hereinafter “Seller Losses”) arising out of or resulting from:

(a) the breach of any representation, warranty, covenant or agreement by Purchaser contained herein or in any exhibit, schedule or certificate delivered under this Agreement;

(b) the failure of Purchaser to pay, perform or otherwise discharge the Assumed Liabilities;

(c) The failure to pay rents and/or to pay or perform any other obligation arising under any Lease or otherwise in connection with the Business which such rent obligations or other obligations arises or accrues on or after the Closing Date (and which shall expressly include, but not be limited to, the obligation to indemnify and hold harmless Landry’s and/or any of its Affiliates from any Seller Losses suffered or incurred by Landry’s or any of such Affiliates as a result of any such failure described in this Section 6.2(c) arising out of a guarantee of any Lease by Landry’s or by any such Affiliate of Landry’s); or

(d) Any claims or lawsuit, the underlying allegations of which occur on or after the Closing, brought against Sellers or Landry’s relating to the Assets.

6.3 Indemnification Procedures.

(a) For the purposes of this Section 6.3(a), the term “Indemnitee” shall refer to the Person indemnified, or entitled, or claiming to be entitled, to be indemnified, pursuant to the provisions of Section 6.1 or 6.2. as the case may be; the term “Indemnitor” shall refer to the Person having the obligation to indemnify pursuant to such provisions; and “Losses” shall refer to the “Seller Losses” or the “Purchaser Losses,” as the case may be.

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(b) An Indemnitee shall give written notice (a “Notice of Claim”) to the Indemnitor within thirty (30) days (or, to the extent possible, within such shorter period as may be necessary to give the Indemnitor a reasonable opportunity to respond to such claim) after the Indemnitee has knowledge of any claim (including a Third Party Claim in which case such Notice of Claim shall set forth the name of the party making such Third Party Claim, to the extent known) which an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement. No failure to give such Notice of Claim shall affect the indemnification obligations of the Indemnitor hereunder, except to the extent such failure shall have prejudiced such Indemnitor’s ability to successfully defend the matter giving rise to the claim. The Notice of Claim shall state the nature of the claim and the amount of the Loss, if known, and the Indemnitor shall have a period of thirty (30) days to reply to such Notice of Claim.

(c) The obligations and liabilities of an Indemnitor under this Article VI with respect to Losses arising from claims of any third party that are subject to the indemnification provisions provided for in this Article VI (“Third Party Claims”) shall be governed by the following additional terms and conditions: The Indemnitee at the time it gives a Notice of Claim to the Indemnitor of the Third Party Claim shall advise the Indemnitor that the Indemnitor shall be permitted, at the Indemnitor’s option (subject to the exceptions below), to assume and control the defense of such Third Party Claim at the Indemnitor’s expense and through counsel of the Indemnitor’s choice reasonably acceptable to Indemnitee if the Indemnitor gives notice within the 30 day period specified above of the Indemnitor’s intention to do so; provided that if Indemnitee has a reasonable belief Indemnitor’s counsel is not vigorously defending the case, Indemnitee can notify Indemnitor and within 15 days of receipt of such notice Indemnitor and Indemnitee shall use good faith efforts to determine whether to hire new counsel mutually acceptable to Indemnitor and Indemnitee.

(i) the Indemnitee shall cooperate with the Indemnitor in such defense and make available to the Indemnitor all witnesses, pertinent records, materials and information in the Indemnitee’s possession or under the Indemnitee’s control relating thereto as is reasonably required by the Indemnitor, and the Indemnitee may participate by the Indemnitee’s own counsel and at the Indemnitee’s own expense (unless a conflict of interest exists between the Indemnitor and the Indemnitee, in which case the expense of Indemnitee’s counsel shall be borne by the Indemnitor);

(ii) except for the settlement of a Third Party Claim which involves the payment of money only, which is to be paid in full by the Indemnitor, no Third Party Claim for which the Indemnitor has elected to defend may be settled by the Indemnitor without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld or delayed; and

(iii) the Indemnitee shall be entitled to assume control of such defense and the Indemnitor shall pay the fees and expenses of counsel retained by the Indemnitee if (A) the claim for indemnification relates to or arises in connection with any criminal proceeding; (B) the claim seeks an injunction or equitable relief against the Indemnitee; or (C) Indemnitee does not receive written notice within said period that the Indemnitor has elected to assume the defense of such Third Party Claim.

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(d) Whether or not Indemnitee elects to assume the defense of such Third Party Claim, the Indemnitor shall not be relieved of the Indemnitor’s obligations hereunder. The Indemnitee will give the Indemnitor at least fifteen (15) days notice of any proposed settlement or compromise of any Third Party Claim it has elected to defend, during which time the Indemnitor may assume the defense of, and responsibility for, such Third Party Claim and if it does so the proposed settlement or compromise may not be made. In the event the Indemnitee is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in such defense and make available to the Indemnitee all such witnesses, records, materials and information in the Indemnitor’s possession or under the Indemnitor’s control relating thereto as is reasonably required by the Indemnitee and the Indemnitor may participate by the Indemnitor’s own counsel and at the Indemnitor’s own expense in the defense of such Third Party Claim.

(e) Any claim by an Indemnitee with respect to Losses which do not result from a Third Party Claim will be asserted in the same manner as specified in Section 6.3(b) above. If the Indemnitor does not respond to such claim within the thirty (30) day period specified in Section 6.3(b), the Indemnitor will be deemed to have rejected such claim, in which event the Indemnitee will be free to pursue such remedies as may be available to the Indemnitee under this Agreement.

6.4 Calculation of Losses.

(a) To the extent any Losses of an Indemnitee are reduced by receipt of payment (a) under third-party provider insurance policies which are not subject to retroactive adjustment or other reimbursement to the insurer or any directly related increase in insurance premium in respect of such payment or (b) from third parties not affiliated with the Indemnitee, such payments (net of the expenses of the recovery thereof) shall be credited against such Losses and, if indemnification payments shall have been received prior to the collection of such proceeds, the Indemnitee shall remit to the Indemnitor the amount by which the total amount received by Indemnitee in respect of such Losses (including from any insurance policy, the Indemnitor or any other Person) exceeds the total amount of the Losses suffered by Indemnitee and the expenses incurred by Indemnitee in collecting such amounts.

(b) If a representation or warranty contained in Article III that is qualified by materiality (including by reference to a dollar threshold) is found to be inaccurate after taking into account the relevant materiality qualifier, then the materiality qualifier shall be ignored solely for purposes of determining the amount of any Indemnitee Losses caused by such inaccuracy. For the avoidance of doubt, the Parties agree that such materiality qualifiers shall be considered for purposes of determining whether the representations or warranties to which they qualify are accurate.

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6.5 Exclusive Remedy. From and after the Closing, none of the Parties hereto shall be liable or responsible in any manner whatsoever to any other Party, whether for indemnification or otherwise, except for indemnity as expressly provided in this Article VI, and, with respect to Taxes, as provided in Article VII, which together provide the exclusive remedy and cause of action of the Parties hereto with respect to any matter arising out of or in connection with this Agreement or any Schedule or Exhibit hereto or any opinion or certificate delivered in connection herewith. Each of the Parties hereby waives, releases and agrees not to make any claim or bring any contribution, cost recovery or other action against the other Parties or any of their respective successors or assigns or any controlling Person or other Affiliate of the other Parties, under common law or any Federal, state or local law or regulation now existing or hereafter enacted which seeks to allocate liabilities between Purchaser and Seller in a different manner than as expressly set forth in this Agreement. Notwithstanding the foregoing, nothing herein will limit in any way any Party’s liability or remedies in respect of (A) fraud or intentional breach of a representation, warranty or covenant or (B) equitable or injunctive relief to enforce this Agreement.

6.6 Limitation and Expiration.

(a) The Indemnitor shall be liable for all Losses arising out of any breaches of the covenants, agreements, representations and warranties set forth in this Agreement, unless any such covenant, agreement, representation or warranty shall have been specifically waived in writing by the Indemnitee.

(b) Landry’s and Sellers shall not have any liability to indemnify under this Article VI, for Losses arising out of (i) any breach of any representation or warranty (other than breaches of representations or warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.7 3.1.14, 3.1.16 and 3.1.19), by either Landry’s or any Seller and (ii) any Excluded Liability referenced in Section 1.1.2(b)(ii)(C) unless the amount of such Losses on an aggregate basis exceed $1,500,000 (“Threshold Amount”) provided however that if such Threshold Amount is exceeded, Landry’s and Sellers shall be liable for all Purchaser Losses that exceed the Threshold Amount. The aggregate amount of the Losses for which Sellers or Landry’s, on the one hand, or Purchaser on the other, may be responsible under this Article VI shall not exceed an amount equal to the Purchase Price, except for Losses arising out of intentional fraud, which may be unlimited.

(c) The indemnification obligations under this Article VI or under any certificate or writing furnished in connection herewith, shall terminate at the date that is the later of clause (i), (ii) or (iii) of this Section 6.6(c), as applicable:

(i) except for the representations and warranties set forth in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.14, 3.1.16, 3.1.19 and 3.1.20 all representations and warranties of Sellers or Landry’s set forth in this Agreement shall terminate fifteen (15) months after the Closing Date.

(ii) (A) with respect to claims relating to or arising out of Sections 3.1.14 and 3.1.19, the date that is six (6) months after the expiration of the longest applicable federal or state statute of limitations (including any extension thereof) or if there is no applicable statute of limitations, ten (10) years after the Closing Date; or

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(B) with respect to claims arising under Section 3.1.20, December 31, 2008;

(C) with respect to claims arising under Section 3.1.16 for three years after the Closing Date; or

(D) with respect to all other claims, including specifically, without limitation, claims arising from (x) the representations and warranties set forth in Sections 3.1.1, 3.1.2, and 3.1.3; (y) any covenant or agreement of any party contained herein; and (z) any matter listed in Sections 6.1(b), 6.1(c), 6.2(b), 6.2(c) or 6.2(d), the indemnification set forth in Article VII shall be unlimited as to time.

(iii) the final resolution of claims or demands pending as of the relevant dates described in this Section 6.6

No Indemnitee shall be entitled to seek indemnification pursuant to this Article VI with respect to the breach of a representation or warranty to the extent that such Indemnitee had actual Knowledge that such representation or warranty was not true and correct in all material respects when made; provided that no actual Knowledge shall be presumed based solely on the fact that the subject matter of the relevant breach was disclosed (x) on any Schedule hereto or (y) in the virtual data room hosted by Merrill Corporation; provided further that the Indemnitor shall bear the burden of proof that the Indemnitee had actual Knowledge.

6.7 No Consequential Damages. The obligations of any Indemnitor in respect of a claim for indemnification under this Article VI shall not include any special, exemplary or consequential damages (other than with respect to any breach of Section 3.1.6), including business interruption or lost profits, or any punitive damages, in each case, unless relating to a Third Party Claim, made by any Indemnitee.

ARTICLE VII

CERTAIN TAX MATTERS

7.1 Pre-Closing Taxes. After the Closing Date, Landry’s agrees to indemnify Purchaser and Newco against all Taxes (i) imposed on Newco, any Seller or any member of an affiliated group with which Landry’s files a consolidated or combined income tax return with respect to any taxable period that ends before the Closing Date, or (ii) imposed on Newco with respect to any taxable period that ends on the Closing Date, including by application of Section 7.3(a) below and including any Taxes resulting from or attributable to the Section 338(h)(10) Election (except as provided below). Any indemnity payment made by Landry’s pursuant to this Section 7.1 shall be treated for tax purposes as an adjustment to the Purchase Price.

7.2 Straddle Period Taxes. For purposes of this Agreement, in the case of any Tax that is imposed on a periodic basis and is payable for a period that begins before the Closing Date and ends after the Closing Date, the portion of such Tax payable for the period ending on

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the Closing Date shall be (i) in the case of any Tax other than a Tax based upon or measured by income or wages, the amount of such Tax for the entire period multiplied by a fraction, the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in the entire period and (ii) in the case of any Tax based upon or measured by income or wages, the amount which would be payable if the taxable year ended on the Closing Date. Any credit or prepayment shall be prorated based upon the fraction employed in clause (i) of the preceding sentence.

7.3 Section 338(h)(10) Election.

(a) Purchaser shall pay all expenses associated with the Section 338(h)(10) Election including, without limitation, the costs of any necessary appraisals.

(b) To the extent permissible under applicable law, the income, gains, losses, deductions and credits of Newco for all taxable periods ending on or before the Closing Date shall be included by Landry’s and/or an applicable Seller in a consolidated, combined or unitary Tax Return. Landry’s shall pay any Taxes imposed as a result of such inclusion, and shall pay all income Taxes related to the Section 338(h)(10) Election.

(c) The covenants and agreements of the parties hereto contained in this Article VII shall survive the Closing and shall remain in full force and effect with respect to: (a) Landry’s obligations until the expiration of six (6) months after all statutes of limitations with respect to any Taxes that would be indemnifiable by Landry’s under Section 7.3(a) or if there is no applicable statute of limitations, ten (10) years after the Closing Date and (b) Purchaser’s obligations until the expiration of six (6) months after all statutes of limitations with respect to any Taxes that would be indemnifiable by Purchaser under Section 7.3(b) or if there is no applicable statute of limitations, ten (10) years after the Closing Date.

(d) To the extent any payments are due from one Party to the other in connection with the provisions of this Section 7.3, the Parties shall utilize the procedures set forth in Section 1.2.1(c) to establish and pay any such amount.

ARTICLE VIII

ADDITIONAL AGREEMENTS

8.1 Exclusivity. From the date hereof until the date on which this Agreement is terminated in accordance with Article VIII below, Landry’s will not, and will cause the Sellers and its and their employees, officers, directors, advisors and representatives not to, (directly or indirectly) solicit, initiate or encourage (including by way of furnishing information), engage in discussions or negotiations with, enter into any agreements with, any party other than Purchaser (i) for the sale, transfer or other disposition of the Business, any material portion of the Assets or the Newco Interests (or any existing equity interests in the Sellers), or (ii) involving any merger, recapitalization, consolidation, or joint venture involving any Seller; provided, however, that subsection (i) above will not prohibit (A) the Restructuring, or (B) actions taken in the ordinary course (including issuing equity upon the exercise of options). Each of the Sellers and Landry’s

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represents and warrants that none of them is subject to any Contract or other (written or oral) understanding providing for an obligation comparable to the subject matter governed by this Section 8.1.

8.2 Employee Matters.

(a) Newco shall, effective as of the date of the Restructuring and Purchaser shall, effective as of the Closing Date, cause Newco to continue to offer employment in connection with the conduct of the Business to all employees of Sellers who are employed at the Premises (excluding except as otherwise required by Applicable Law, employees who are on a leave of absence for any reason) and to those Persons listed in Schedule 8.2(a). All such employees who accept Newco’s offer of employment will become employees of Newco (the “Transferred Employees”). Newco shall not be required to offer employment to any employee that is not actively at work on the Closing Date as the result of a long-term disability or of any disciplinary action by Sellers or Landry’s.

(b) Sellers and Landry’s hereby agree that any employee of the Business who (A) as of the Closing Date is short-term disabled or receiving or entitled to receive short-term disability benefits and who subsequently becomes eligible to receive long-term disability benefits, or (B) as of the Closing Date is receiving or entitled to receive long-term disability benefits, shall become eligible or continue to be eligible, as applicable, to receive long-term disability benefits under Landry’s long-term disability plan unless and until such individual is no longer disabled.

(c) With respect to each Transferred Employee:

(i) Purchaser will cause Newco to initially provide the Transferred Employees with base salary or wages and compensation bonus and incentive programs, other than any equity-based incentive programs, substantially similar to that provided such employees by Sellers prior to the Restructuring. With respect to non-wage terms and conditions of employment, such as pension or savings plans, health, life and disability insurance (other than any equity-based plan or arrangement), Purchaser may either (A) establish or provide arrangements that are similar to those provided such employees by Sellers prior to the Restructuring, or (B) cover such employees (to the extent underwriting conditions permit) under the arrangements Purchaser provides its current, similar-treated employees. To the extent provided under its medical plan, if any, Purchaser shall waive pre-existing condition requirements, evidence of insurability provisions or any similar provisions for the Transferred Employees as of the Closing Date to the extent such individuals were covered under Sellers’ or Landry’s applicable medical plan (“Sellers’ Medical Plan”) and to the extent such requirements or provisions did not apply under Sellers’ Medical Plan.

(ii) The insurance providers shall be solely responsible for medical expenses covered under the terms of Sellers’ Medical Plan incurred by a Transferred Employee and/or his covered dependents prior to the Closing Date, regardless of when such expense is reported. Purchaser shall not be responsible for any such medical expenses under Seller’s Medical Plans.

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(iii) Purchaser shall recognize for purposes of eligibility for participation and vesting under its employee benefit plans and compensation arrangements (other than any defined benefit plan or any equity-based plan) the service of any Transferred Employee with Landry’s and/or its Affiliates to the extent recognized under an analogous Corporation Benefit Plan on the Closing Date.

(d) Effective as of the Closing Date, Sellers and Landry’s shall cause each Transferred Employee who is a participant under Seller’s 401(k) Plan and/or Seller’s non-qualified deferred compensation plan to become fully vested in such participant’s accrued benefit(s) under such plan(s) determined as of the Closing Date. In addition, on the Closing Date Sellers or Landry’s shall make a contribution to Seller’s 401(k) Plan of the matching contribution that would be earned if each Transferred Employee remained an active participant or employee thereunder through the end of the plan year that includes the Closing Date, pro-rated from the beginning of such plan year to the Closing Date. Effective as of the Closing Date, Seller or Landry’s shall take all actions as may be reasonably necessary to amend Seller’s 401(k) Plan to provide that loan balances thereunder of Transferred Employees may be rolled over to a 401(k) Plan of Newco (or an Affiliate thereof) and will not default in connection with the transaction contemplated hereby.

(e) Sellers and Landry’s shall make all bonus, incentive and commission payments (on a pro rata basis) that the Business is obligated to make to any Transferred Employee under any bonus, incentive or commission plan for calendar year 2006 through the day prior to the Closing Date within sixty (60) days after the Closing Date.

(f) None of Purchaser, Newco, Landry’s or Sellers intend this Agreement to create any rights or interest, except as between Purchaser, Newco, Landry’s and Sellers, and no former or present or future employees, officers, directors or contractors of any Party (or any dependents of such persons) will be treated as third party beneficiaries in or under this Agreement. Nothing in this Agreement shall be construed to require Purchaser or any of its Affiliates (including, for the avoidance of doubt, Newco) to employ or continue to employ any Transferred Employee on or following the Closing, confer upon any Transferred Employee any right with respect to employment or continued employment by Purchaser or any of its Affiliates (including, for the avoidance of doubt, Newco) on or following the Closing or interfere with Purchaser’s or any of its Affiliates’ (including, for the avoidance of doubt, Newco’s) rights to adjust a Transferred Employee’s compensation or work schedule and nothing in this Agreement shall be construed to modify, amend, or establish any employee benefit plan, program or arrangement or in any way affect the ability of any Party to modify, amend or terminate any of its employee benefit plans, programs or arrangements.

(g) Before and after the Closing Date, Sellers, Landry’s, Newco and Purchaser will cooperate to make available to each other on a prompt basis all reasonable information and documents as may be necessary to coordinate the employment of Transferred Employees, their benefit programs and employment practices and to further the orderly administration of those programs and practices as contemplated in the provisions of this Agreement relating to Transferred Employees. Sellers and Landry’s shall retain sponsorship of and Liability for all Corporation Benefit Plans following the Closing.

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(h) Sellers, Landry’s and Purchaser agree to use their reasonable efforts to execute all necessary documents, file all required forms with any governmental agencies and to undertake all actions that may be necessary or desirable to implement expeditiously any actions contemplated in this Section 8.2(h).

8.3 Maintenance of Books and Records. Each of Landry’s, Sellers and Purchaser shall preserve until the third anniversary of the Closing Date all records possessed or to be possessed by such Party relating to any of the assets, liabilities or business of the Business prior to the Closing Date. After the Closing Date, where there is a legitimate purpose, such Party shall provide the other Parties with access, upon prior reasonable written request specifying the need therefor, during regular business hours, to (a) the officers, directors, accountants, and employees of such Party and (b) the books of account and records of such Party, and the other Parties and their representatives shall have the right to make copies of such books and records; provided, however, that the foregoing right of access shall not be exercisable in such a manner as to interfere unreasonably with the normal operations and business of such Party; and further provided, that, as to so much of such information as constitutes trade secrets or confidential business information of such Party, the requesting Party and its officers, directors and representatives will use due care to not disclose such information except (i) as required by law, (ii) with the prior written consent of such Party, which consent shall not be unreasonably withheld, or (iii) where such information becomes available to the public generally, or becomes generally known to competitors of such Party, through sources other than the requesting Party, its Affiliates or its officers, directors or representatives. Such records may nevertheless be destroyed by a Party if such Party sends to the other Party written notice of its intent to destroy records, specifying with particularity the contents of the records to be destroyed. Such records may then be destroyed after the 30^th day after such notice is given unless the other Party objects to the destruction, in which case, the Party seeking to destroy the records shall deliver such records to the objecting Party.

8.4 Payments Received. Landry’s, Sellers and Purchaser each agree that after the Closing Date they will hold and will promptly transfer and deliver to the other, from time to time as and when received by them, any cash, checks with appropriate endorsements (using their best efforts not to convert such checks into cash), or other property that they may receive on or after the Closing Date which properly belongs to the other Party and will account to the other for all such receipts.

8.5 Transition Services Agreement. On the Closing Date, the Parties shall enter into the Transition Services Agreement, which will provide for operation and management by Landry’s, for up to one year following Closing, of the properties forming a part of the Business.

8.6 Licenses.

(a) Purchaser grants to Landry’s and its Affiliates at Closing a nonexclusive, worldwide, royalty-free license to use the Joe’s Intellectual Property Rights for a term of twenty four (24) months from Closing in connection with marketing and

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operation of the restaurants listed on Schedule 8.6(a). Purchaser further grants to Landry’s and its Affiliates at Closing a ten year, non-exclusive, royalty-free license (with three five year extension options at Landry’s sole discretion) to use the Joe’s Intellectual Property Rights in connection with the marketing and operation of the Joe’s Crab Shack Restaurants located in Kemah, Texas and at the Golden Nugget Casino in Laughlin, Nevada (“Exclusive Restaurants”); provided that such license shall automatically terminate with respect to an Exclusive Restaurant upon the conversion of such restaurant to a concept other than Joe’s Crab Shack. Upon expiration of the license referred to in the immediately preceding sentence, Landry’s may continue to use the Joe’s Crab Shack trade dress in connection with the Exclusive Restaurants.

(b) “Joe’s Intellectual Property Rights” shall mean any Marks relating to the Business, whether registered or unregistered, and any similar or equivalent rights to the foregoing anywhere in the world, and any applications therefor including, without limitation, those items set forth on Schedule 8.6(b) hereto and any logos listed on Schedule 8.6(b). Joe’s Intellectual Property Rights shall also mean all formulae, recipes, mixing instructions and know-how used in the Business at the Premises, registered or unregistered.

8.7 Gift Cards. Each month, for up to 24 months following Closing, Purchaser shall provide Landry’s a monthly accounting of all gift cards issued prior to Closing that are used for purchases on the Premises. Within sixty (60) days following Landry’s receipt of such accounting, Landry’s will pay Purchaser the amount of such gift card usage less the applicable discount offered in selling such gift card as set forth on Schedule 8.7. Each month, for up to 24 months following Closing, Landry’s shall provide Purchaser a monthly accounting of all gift cards issued by Purchaser or Newco after Closing that are used for purchases at any Joe’s Crab Shack retained by Landry’s. Within 60 days following Purchaser’s receipt of such accounting, Purchaser will pay Landry’s the amount of such gift card usage less the discount offered in selling such gift card, if such discount is applicable. Landry’s and Sellers shall within 6 months, following the Closing, discontinue selling gift cards that would entitle the holder of such card to dine in any restaurant of the Business and, shall discontinue within a commercially reasonable time the issuance of any gift card containing a Joe’s Crab Shack logo. In the event Purchaser’s gift cards are used at any Landry’s restaurant for purchases, Purchaser will pay Landry’s for such purchases using the same procedure as set forth herein.

8.8 Release of Guarantees. Purchaser shall use commercially reasonable efforts (which, for the avoidance of doubt, shall not require the posting of a bond, letter of credit or substitute guarantee) to have the landlords release Landry’s, Sellers and any of their Affiliates from the guarantees of any payments relating to any Premises as promptly as possible.

8.9 Non-Solicitation/Non-Hire Agreement. On the Closing Date, the Parties shall enter into the Non-Solicitation/Non-Hire Agreement.

8.10 Publicity. Purchaser and Landry’s will agree upon the timing and content of the initial press release to be issued describing the transactions contemplated by this Agreement, and will not make any public announcement thereof prior to reaching such agreement unless required to do so by Applicable Law or regulation or stock exchange requirement’ provided that, to the

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extent possible, the Party required to make such announcement shall confer with the other Parties concerning the timing and content of any announcement before it is released to the public. To the extent reasonably requested by any other Party, each Party will thereafter consult with and provide reasonable cooperation to the others in connection with the issuance of further press releases or other public documents describing the transactions contemplated by this Agreement.

8.11 Expenses; Transfer Taxes, and the Like.

(a) All costs and expenses incurred in connection with this Agreement and the related documents and the transactions contemplated hereby and thereby shall be paid by the party incurring such expense; provided that:

(i) Purchaser on the one hand and Landry’s and Sellers on the other, shall each pay one-half of any filing fees required under the HSR Act;

(ii) Purchaser shall pay all recording fees and similar charges for the recording of the Deeds and any other closing documents that are or may be placed of record;

(iii) Purchaser shall pay all fees, costs and expenses with respect to the Commitments, Title Policies and Surveys to be issued in favor of Purchaser with respect to the Fee Properties and Material Leased Properties, the costs of any endorsements to such policies to be borne by Purchaser; and

(iv) All other closing costs shall be split equally between Sellers and Purchasers.

(b) Purchaser on the one hand and Landry’s and Sellers on the other, shall each pay one-half of all transfer, documentary stamp, sales, use, registration, value-added and other similar Taxes in the State of Florida (including all applicable real estate transfer Taxes, ordinary or capital gains payable in respect of any real property transfer and including any filing fees and typical recording fees) and related amounts (including any penalties, interest and additions to Tax) incurred in connection with this Agreement, the documents entered into in accordance therewith and the transactions contemplated hereby and thereby (“Transfer Taxes”). All other Transfer Taxes shall be paid by Purchaser. Each Party shall use reasonable efforts to avail itself of any available exemptions from any such Transfer Taxes, and to cooperate with the other parties in providing any information and documentation that may be necessary to obtain such exemptions, and shall cooperate in good faith to minimize, to the fullest extent possible under such laws, the amount of any such Transfer Taxes payable in connection therewith.

8.12 Transfer of Licenses and Permits. Landry’s and Seller shall use commercially reasonable efforts to assist Purchaser with the assumption, transfer, or reissuance of any and all Permits required for the operation of the Business.

8.13 Restrictions on Assignment, Renewal and Subletting. Purchaser nor any of its Affiliates shall, with the exception of encumbrances created at or in connection with the closing of Purchaser’s financing of the transactions contemplated by this Agreement or transfers to any

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of Purchasers financing or refinancing sources as collateral or to a future purchaser of the Business: (i) voluntarily, by operation of law, or otherwise, renew, assign, transfer, sublease, mortgage, pledge, hypothecate or otherwise encumber any lease or the leasehold estate constituting a portion of the Business upon which Landry’s, Seller or an Affiliate of either has any continuing financial or other obligation (contingent or otherwise) without the express written consent of Landry’s, which consent shall be at Landry’s sole and absolute discretion unless the Sellers and Landry’s are released from any liabilities under the law. Any attempt to do any of the foregoing without such written consent shall be null and void. If Purchaser so requests Landry’s consent, the request shall be in writing specifying the terms of the renewal; the identity of the proposed assignee or sub-lessee; the duration of said desired sublease or renewal, the date same is to occur, the exact location of the space affected thereby and the proposed rentals on a square foot basis chargeable thereunder. Such request for Landry’s consent shall be submitted to Landry’s at least thirty (30) days in advance of the date on which Purchaser desires to make such renewal, assignment or sublease or allow such occupancy or use.

8.14 Consents. Purchaser recognizes that certain consents to the transactions contemplated hereby may have been or may be required from third parties, including parties to Material Contracts and Governmental Authorities. Purchaser agrees that except as set forth in Section 4.7, neither Landry’s, Sellers nor any of their respective Affiliates shall have any liability whatsoever arising out of or relating to the failure to obtain any such consent or because of termination of any contract, permit, license or governmental authorization as a result thereof unless any such Person fails to comply with the applicable cooperation covenants. Purchaser further agrees that no representation, warranty, covenant, or agreement of Landry’s or Seller’s herein shall be breached as a result of (i) the failure to obtain any such consent or any such termination or (ii) any action commenced or threatened by or on behalf of any Person arising out of or relating to the failure to obtain any such consent or because of any such termination unless any such Person fails to comply with the applicable cooperation covenants.

8.15 Further Assurances, Post-Closing Cooperation. At any time or from time-to-time after the Closing, at Purchaser’s request and without further consideration, Landry’s and Sellers shall execute and deliver to Purchaser such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as Purchaser may reasonably deem necessary or desirable in order more effectively to transfer, convey and assign to Purchaser, and to confirm Purchaser’s title to, all of the Assets, and, to the full extent permitted by law, to put Purchaser in actual possession and operating control of the Business and the Assets and to assist Purchaser in exercising all rights with respect thereto, and otherwise to cause Landry’s and Sellers to fulfill their obligations under this Agreement. Sellers shall be reimbursed by Purchaser for any actual out-of-pocket expense incurred in connection with the foregoing.

If, in order properly to prepare its Tax Returns, other documents or reports required to be filed with any Governmental Authority, financial statements or to fulfill its obligations hereunder, it is necessary that a Party be furnished with additional information, documents or records relating to the Business and such information, documents or records are in the possession or control of the other Party, such other Party shall use commercially reasonable efforts to furnish or make available such information, documents or records (or copies thereof) at the recipient’s request, cost and expense. Any information obtained by Sellers or Purchaser in accordance with this paragraph shall be held confidential by Sellers or Purchaser in accordance with Section 4.4.

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8.16 Title Policies. Purchaser may obtain (at its expense) commitments for ALTA owner policies of title insurance (or local equivalent) with respect to each of the Fee Properties (collectively, the “Commitments” and the policies to be issued pursuant thereto the “Title Policies”), together with copies of the documents reflected in the Commitments as exceptions to title. Seller shall have no obligation to cure any title objections or to address or cure any other title defects or other matters affecting title to any tract constituting part of the Real Property, except that Seller shall be obligated to discharge any liens other than those described in Section 3.1.8. Issuance of the Policies shall not be a condition precedent to Purchaser’s obligations hereunder.

8.17 Surveys. Purchaser may obtain (at its expense) surveys with respect to each of the Real Properties, dated no earlier than the date of this Agreement, and certified to Purchaser, Purchaser’s lender and the Title Company (the “Surveys”). Issuance of the Surveys shall not be a condition precedent to Purchaser’s obligations hereunder.

8.18 Billboard. Landry’s shall neither (a) permit any Person other than Landry’s or a Subsidiary of Landry’s or any entity managed by Landry’s to advertise, nor (b) advertise or permit any other Person to advertise, in each case, any individual casual dining restaurant at the billboard located at the restaurant designated as Houston 610, 2621 South Loop West, Houston, Texas on Exhibit A-1.

ARTICLE IX

MISCELLANEOUS

9.1 Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated by written notice of termination at any time before the Closing Date only as follows:

(a) by mutual written consent of Purchaser and Landry’s; or

(b) by Purchaser or Landry’s if the Closing shall not have occurred by November 30, 2006, provided, however, that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any Party whose failure to perform any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; or

(c) by Purchaser or Landry’s, if any court of competent jurisdiction or Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the payment of the Purchase Price and such order, decree, ruling or other action shall have become final and nonappealable; or

(d) by Landry’s, in the event of a breach in any material respect by Purchaser of any representation, warranty, covenant or agreement contained in this

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Agreement which (i) cannot or has not been cured within fifteen (15) days after the giving of written notice of such breach to Purchaser and has not been waived by Landry’s pursuant to the provisions hereof and (ii) would cause the conditions set forth in Article V not to be satisfied;

(e) by Purchaser, in the event of a breach in any material respect by Seller or Landry’s of any representation, warranty, covenant or agreement contained in this Agreement which (i) cannot or has not been cured prior to fifteen (15) days after the giving of written notice of such breach to Sellers and has not been waived by Purchaser pursuant to the provisions hereof and (ii) would cause the conditions set forth in Article V not to be satisfied.

9.2 Effect of Termination and Abandonment. In the event of termination of this Agreement and abandonment of the transactions contemplated hereby, no Party (or any of its directors or officers) shall have any liability or further obligation to any other Party, except that nothing herein will relieve any Party from liability for any breach of this Agreement.

9.3 Bulk Sales Law. Purchaser waives compliance by Sellers with the provision of any applicable bulk sales laws. Sellers shall promptly pay and discharge when due or contest or litigate all claims of creditors that are asserted against Purchaser by reason of non-compliance with such laws, except with respect to any such claims that related to the Assumed Liabilities. This provision shall survive Closing.

9.4 Expenses. Each party shall bear its own expenses, including the fees and expenses of any attorneys, accountants, investment bankers, brokers, finders or other intermediaries or other Persons engaged by it, incurred in connection with this Agreement and the transactions contemplated hereby.

9.5 Contents of Agreement; Amendments. This Agreement and the Confidentiality Agreement dated July 19, 2006 between J.H. Whitney & Co. LLC and Landry’s (the “Confidentiality Agreement”) sets forth the entire understanding of the Parties hereto with respect to the transactions contemplated hereby. Any and all previous agreements and understandings between or among the Parties regarding the subject matter hereof, whether written or oral (other than the Confidentiality Agreement), are superseded by this Agreement. This Agreement shall not be amended or modified except by written instrument duly executed by each of the Parties hereto.

9.6 Assignment and Binding Effect. This Agreement may not be assigned prior to the Closing by any Party without the prior written consent of the other Parties, provided that Purchaser may assign this Agreement to an affiliate of Purchaser, collaterally to any of Purchaser’s financing or refinancing sources and to any future purchaser of the Business; provided, however, that in all cases (regardless of any such assignment) Purchaser shall remain responsible for their obligations to close the transactions contemplated herein and all of their other obligations under this Agreement. Subject to the foregoing, all of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and assigns of Landry’s, Sellers and Purchaser, provided that the Parties hereto shall continue to be obligated in accordance with the terms of this Agreement.

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9.7 Waiver. Any term or provision of this Agreement may be waived at any time by the Party entitled to the benefit thereof by a written instrument duly executed by such Party.

9.8 Notices. All notices required or permitted to be given hereunder shall be in writing and may be delivered by hand, by facsimile, by nationally recognized private courier, or by United States mail. Notices delivered by mail shall be deemed given three (3) days after being deposited in the United States mail, postage prepaid, registered or certified mail. Notices delivered by hand, by facsimile, or by nationally recognized private carrier shall be deemed given on the first Business Day following the date sent; provided, however, that a notice delivered by facsimile shall only be effective if such notice is also delivered by hand, or deposited in the United States mail, postage prepaid, registered or certified mail, on or before two (2) Business Days after its delivery by facsimile. All notices shall be addressed as follows:

(a)	As to Landry’s and Sellers:	Landry’s Restaurants, Inc.
		1510 West Loop South
		Houston, Texas 77027
		Telephone:(713)386-7000
		Telecopy: (713)386-7070
		Attention: Tilman J. Fertitta, Chairman, President and Chief Executive Officer
	with a copy (which shall not constitute notice) to:	Haynes and Boone, LLP
		1221 McKinney Street, Suite 2100
		Houston, Texas 77010
		Telephone: (713) 547-2526
		Telecopy: (713) 236-5652
		Attention: Arthur S. Berner
(b)	As to Purchaser:	J.H. Whitney & Co.
		130 Main Street
		New Canaan, CT 06840
		Telephone: 203.716.6100
		Telecopy: 203.716.6101
		Attention: Robert Q. Berlin
		rberlin@whitney.com
		Paul R. Vigano
		pvigano@whitney.com
	with a copy (which shall not constitute notice) to:	Kirkland & Ellis LLP
		Citigroup Center
		153 East 53rd Street
		New York, NY 10022
		Telephone: 212-446-4800
		Telecopy: 212-446-6460
		Attention: Frederick Tanne
		ftanne@kirkland.com
		Markus P. Bolsinger
		mbolsinger@kirkland.com

54

or to such other address and to the attention of such other Person as the Party to whom such notice is to be given may have theretofore designated in a notice to the other Party hereto.

9.9 Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the internal laws of the State of Delaware.

9.10 No Benefit to Others. The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the Parties hereto and, in the case of Article VI hereof, the other Indemnities, and their heirs, executors, administrators, legal representatives, successors and assigns, and they shall not be construed as conferring any right son any other Persons.

9.11 Headings, Gender and “Person”. All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context requires. Any reference to a “Person” herein shall include an individual, firm, corporation, partnership, trust, Governmental Authority or body, association, unincorporated organization or any other entity. Any use of the term “including” shall be interpreted to mean “including, without limitation”

9.12 Schedules and Exhibits. All schedules and exhibits referred to herein are intended to be and hereby are specifically made a part of this Agreement.

9.13 Severability. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability, and any such invalidity or unenforceability shall not invalidate or render unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

9.14 Counterparts: Facsimile Signatures. This Agreement may be executed in any number of counterparts and any Party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become binding when one or more counterparts taken together shall have been executed and delivered by the Parties. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. The Parties agree that facsimile or electronic transmission of original signatures shall constitute and be accepted as original signatures.

9.15 No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent and agreement, and no rule of strict construction shall be applied against any Party.

55

9.16 Jurisdiction and Service of Process. SELLERS, LANDRY’S AND PURCHASER HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW CASTLE COUNTY, DELAWARE, AND IRREVOCABLY AGREE THAT, SUBJECT TO THE OTHER PROVISIONS OF THIS AGREEMENT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT WHICH MAY BE LITIGATED SHALL BE LITIGATED IN SUCH COURTS. EACH OF SELLERS, LANDRY’S AND PURCHASER ACCEPTS FOR SUCH PARTY AND IN CONNECTION WITH SUCH PARTY’S PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.

9.17 Risk of Loss. The risk of any loss, damage, impairment, confiscation or condemnation of the Assets or any part thereof shall be upon Landry’s and Sellers at all times before the Closing Date. In any such event, Landry’s and/or Sellers may either (a) repair, replace or restore any such property as soon as possible after its loss, impairment, confiscation or condemnation, or (b) if insurance proceeds are sufficient to repair, replace or restore the property, pay such proceeds to Purchaser; provided, however, that in the event of damage to any substantial portion of the Assets, Purchaser may terminate with no penalty or liability to Landry’s or Sellers or any other Party hereto.

[SIGNATURE PAGE FOLLOWS]

56

IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day and year first above written.

JCS HOLDINGS, LLC
By:	/s/ Robert Berlin
Name:	Robert Berlin
Title:	President
LANDRY’S RESTAURANTS, INC.
By:	/s/ Tilman J. Fertitta
	Tilman J. Fertitta
	President
LSRI HOLDINGS, INC.
By:	/s/ Tilman J. Fertitta
Name:	Tilman J. Fertitta
Title:	President

IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day and year first above written.

JCS HOLDINGS, LLC
By:	/s/ Robert Berlin
Name:	Robert Berlin
Title:	President
LANDRY’S RESTAURANTS, INC.
By:	/s/ Tilman J. Fertitta
	Tilman J. Fertitta
	President
LSRI HOLDINGS, INC.
By:	/s/ Tilman J. Fertitta
Name:	Tilman J. Fertitta
Title:	President

ANNEX I

DEFINITIONS

Capitalized terms used but not defined in the Stock Purchase Agreement have the respective meanings assigned to such terms below.

“AAA” is defined in Section 1.2.1 (c)(ii).

“Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

“Agreement” is defined in the first paragraph of this Agreement.

“Applicable Law” means any law, order, rule or regulation applicable to the Sellers or the assets of the Sellers including, but not limited to, all applicable building, zoning, subdivision, health and safety and other land use laws, including, without limitation, The Americans with Disabilities Act of 1990, as amended, and all insurance requirements affecting the Real Property.

“Appurtenant Rights” is defined in Section l.l.l (a)(ii).

“Assets” is defined in Section 1.1.1.

“Assigned Contracts” is defined in Section l.l.l(a)(v).

“Assignment of Trademarks and Copyrights” is defined in Section 2.2(a)(iii).

“Assumed Liabilities” is defined in Section 1.1.2(a).

“Assumption Agreement” is defined in Section 2.2(a)(v).

“Blue Sky Laws” is defined in Section 3.1.5(b).

“Business” is defined in Recital A.

“Business Employees” is defined in Section 3.1.20(a).

“California Break Pay Litigation” means the class action litigation entitled Kyle E. Pietrzak and Kristina Brask on behalf of themselves and all others similarly situated vs. Joe’s Crab Shack—San Diego, Inc., Crab Addison, Inc., Landry’s Seafood House Arlington, Inc. and Joe’s 1 through 125 and any other claim based on unpaid wages or overtime allegedly owed under state or federal wage and hour laws for services performed on or before the Closing Date.

“Closing” is defined in Section 2.1.

“Closing Date” is defined in Section 2.1.

“Closing Financial Statement” is defined in Section 1.2.1(c)(i).

A-1

“COBRA” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code, and any similar state Applicable Law.

“Code” means the Internal Revenue Code of 1986, as amended. “Commitments” is defined in Section 8.16. “Commitment Letter” is defined in Section 3.2.5. “Confidential Information” is defined in Section 4.4. “Confidentiality Agreement” is defined in Section 9.5.

“Concession-Management Agreement” means those agreements relating to the operation of certain restaurants prior to Purchaser having received its own liquor license.

“Contract” means any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase order or other agreement, commitment, or license.

“Corporation Benefit Plans” is defined in Section l.l.l(b)(ix).

“Debt Commitment Letter” is defined in Section 3.2.5.

“Deeds” is defined in Section 2.2(a)(xvii).

“EBITDA Repurchase Price” is defined in Section 4.7(c).

“Environmental Law” means any applicable federal, state, and local statute, regulation, ordinance, and administrative or judicial order relating to protection of public health and welfare, worker health and welfare, or pollution or protection of the environment, including, without limitation, those regulating hazardous substances, such as CERCLA, the Resource Conservation and Recovery Act, the Federal Clean Air and Clean Water Acts, and their state analogs, and those relating to the protection of environmentally sensitive areas.

“Equity Commitment Letter” is defined in Section 3.2.5.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any Person at any relevant time considered a single employer with the Landry’s, any Seller or Newco or any of their Affiliates.

“Estimated Working Capital is defined in Section 1.2.1(b)(ii).

“Estimated Working Capital Excess Payment” is defined in Section 1.2.1(b)(iii).

“Estimated Working Capital Shortfall Reductions” is defined in Section 1.2.1 (iii).

“Exchange Act” is defined in Section 3.1.5(b).

A-2

“Excluded Assets” is defined in Section 1.1. l(b).

“Excluded Contracts” is defined in Section l.l.l(b)(vii).

“Excluded Liabilities” is defined in Section 1.1.2(b).

“Exclusive Restaurants” is defined in Section 8.6.

“Fee Property” is defined in Section l.l.l(a)(i).

“Final Working Capital” is defined in Section 1.2.1 (c)(iv).

“Financial Statements” is defined in Section 3.1.6(a).

“Financing Documents” means documents contemplated by the Debt and Equity Commitment Letters.

“FIRPTA Affidavit” is defined in Section 2.2(a)(xiv).

“Funded Indebtedness” means, without duplication, (i) any Liability or obligation of Landry’s, Sellers or Newco not included as a current liability in the Working Capital, (ii) any obligations under any indebtedness for borrowed money (including, without limitation, all obligations for principal, interest premiums, penalties, fees, expenses, breakage costs and bank overdrafts thereunder), (iii) any indebtedness evidenced by any note, bond, debenture or other debt security, (iv) any commitment by which a Person assures a financial institution against loss (including contingent reimbursement obligations with respect to letters of credit), (v) any off-balance sheet financing, including synthetic leases and project financing, (vi) all obligations under capitalized leases, (vii) any payment obligations in respect of banker’s acceptances or undrawn stand-by letters of credit other than as it relates to the Business in connection with workman’s compensation collateral, (viii) any Liability with respect to interest rate swaps, collars, caps and similar hedging obligations, (ix) the indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or joint venturer (x) the present value of (A) post-retirement health care benefit Liabilities, (B) any payments owed to current or former equity holders under any non-compete or consulting arrangement and (C) any sale bonus, retention bonus, change of control, severance or other payment triggered solely as a result of the consummation of the transactions contemplated by this Agreement, (xi) all obligations for the deferred and unpaid purchase price of Assets and (xii) any obligation, whether direct or indirect, contingent or otherwise, to guarantee any payment obligation of any other Person as it relates to the Business.

“GAAP” means Generally Accepted Accounting Principles. “Governmental Authorities” is defined in Section 3.1.5(b).

“Hazardous Substance” means “hazardous substance,” “pollutant” or “contaminant,” and “petroleum” and “natural gas liquids” as those terms are defined or used in Section 101 of CERCLA, and any other substances regulated because of their effect or potential effect on public health and the environment, including, without limitation, PCBs, lead paint, asbestos, urea formaldehyde, bioaerosols, radioactive materials, mold, and putrescible and infectious materials.

A-3

“HSR Act” is defined in Section 2.1.

“Improvements” is defined in Section 3.1.11(d).

“Indemnitee” is defined in Section 6.3(a).

“Indemnitor” is defined in Section Section 6.3(a).

“Independent Accounting Firm” is defined in Section 1.2.1(c)(ii).

“Intellectual Property” is defined in Section 3.1.12(b).

“Interested Party” is defined in Section 4.4.

“Inventory” is defined in Section l.l.l(a)(iv).

“IRS” means the United States Internal Revenue Service.

“JCS Excluded Contracts” is defined in Section 1.1.1 (b)(vii).

“Joe’s Intellectual Property Rights” is defined in Section 8.6(b).

“Joint Advertising Material” means all music, photographs for hire, films, commercials, advertising marketing and promotional materials and all other copyrightable marks, recordings and tangible embodiments thereof in whatever form or medium used to advertise the Business.

“Joint Use Agreement” is defined in Section 2.2(a)(viii).

“Joint Use Marks” is defined in Section 1.1.1(a)(vii).

“Knowledge” as used in this Agreement, “Knowledge” of Sellers or Landry’s, to Sellers’ or Landry’s Knowledge, or words of similar import shall mean the actual knowledge as of the applicable date, after reasonable inquiry, of the following persons: Tilman J. Fertitta, Steven L. Scheinthal and Rick Liem, none of whom shall have any individual liability with respect to their respective Knowledge. As used in this Agreement, “Knowledge” of Purchaser, to Purchaser’s Knowledge, or words of similar import shall mean the actual knowledge as of the applicable date, after reasonable inquiry, of the person’s set forth on Schedule II, none of whom shall have any individual liability with respect to their respective Knowledge.

“Landry’s” is defined in the first paragraph of this Agreement.

“Latest Balance Sheet” is defined in Section 3.1.6(a).

“Lease Assignments” is defined in Section 2.2(a)(iv).

“Leased Property” is defined in Section l.l.l(a)(i).

A-4

“Leasehold Improvements” is defined in Section l.l.l(a)(i).

“Lease Repurchase Obligation” is defined in Section 4.7(c).

“Leases” is defined in Section l.l.l(a)(i).

“Liability” means any liability, whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated and whether due or to become due, including any liability for Taxes.

“Liens” means mortgages, liens, security interests, pledges, easements, rights of first refusal, options, restrictions or encumbrances of any kind.

“Losses” is defined in Section 6.3(a).

“Marks” is defined in Section l.l.l(a)(vii).

“Material Adverse Effect” shall mean any change, event, effect, claim, circumstance or matter that (individually or in the aggregate with all other changes, effects, claims, circumstances or matters) is, or could reasonably be expected to be or to become, materially adverse to (a) the Business, Assets, or Premises of Sellers taken as a whole, or (b) the ability of Sellers or Landry’s to perform any of its material covenants or obligations under this Agreement or under any other Contract executed, delivered or entered into in connection herewith; provided, however, that none of the following, in and of itself, shall be deemed to constitute a Material Adverse Effect: (i) any change or event attributable to conditions generally affecting casual dining-in restaurants or the U.S. economy as a whole, provided that such change or event does not have a disproportionate impact on the Assets or the Business; (ii) the commencement or assertion, in the written opinion of outside legal counsel of national reputation, of an unmeritorious lawsuit or claim against Sellers; (iii); (iv) any change or event attributable to (A) the execution, delivery or public announcement of this Agreement, (B) any act of Sellers undertaken to comply with the terms of the Agreement, or (v) undertaken in contemplation of transactions contemplated by this Agreement and with the prior informed consent of Purchaser; (vi) any change required by any amendment that becomes effective after the date of this Agreement to applicable accounting requirements or principles or applicable laws, rules or regulations; or (vii) any loss by Sellers of any single customer or any single relationship with any licensor.

“Material Contract” is defined in Section 3.1.10(a).

“Newco” is defined in the Recitals.

“Newco Interests” is defined in the Recitals.

“Non-Solicitation/Non-Hire Agreement” is defined in Section 5.1.4.

“Notice of Claim” is defined in Section 6.3(b).

“Notice of Objection” is defined in Section 1.2.1(c)(ii).

A-5

“Party” or “Parties” means one or more as the context requires of Landry’s, Sellers and Purchaser.

“Permits’” is defined in Section l.l.l(a)(vi).

“Permitted Liens” is defined in Section 3.1.8.

“Person” is defined in Section 9.11.

“Premises” is defined in Recital A.

“Proceedings” is defined in Section 3.1.22(k).

“Purchase Price” is defined in Section 1.2.1 (a).

“Purchaser” is defined in the first paragraph of this Agreement.

“Purchaser Losses” is defined in Section 6.1.

“Purchaser Representative” is defined in Section 4.6.

“Purchaser’s Disclosure Schedule” is defined in Section 3.2.

“Real Property” is defined in Section l.l.l(a)(i).

“Required Consents” is defined in Section 2.2(a)(xv).

“Restructuring” is defined in Section 1.1.1.

“Section 338(h)(10) Election” is defined in Section 1.2.3.

“Securities Act” is defined in Section 3.1.5(b).

“Seller” is defined in the first paragraph of this Agreement.

“Sellers” is defined in the Recitals.

“Seller Documents” is defined in Section 3.1.3.

“Seller Losses” is defined in Section 6.2.

“Sellers’ Disclosure Schedule” is defined in Section 3.1.

“Sellers’ Medical Plan” is defined in Section 8.2(c).

“Significant Supplier” is defined in Section 3.1.26.

“Subsidiary” means, with respect to any Person, any other Person of which more than fifty percent (50%) of the capital stock or other interests entitled to vote in the election of directors or comparable Persons performing similar functions are at the time owned or controlled, directly or indirectly, through one or more Subsidiaries, by such Person.

A-6

“Surveys” is defined in Section 8.17.

“Target Working Capital” means negative ten million three hundred twenty-nine thousand nine hundred ten dollars (-$10,329,910)

“Taxes” in the plural and “Tax” in the singular means all federal, state, local and foreign taxes, including income, employment (including Social Security, withholding and state disability), excise, property, franchise, gross income, real or personal property, ad valorem, sales, use, customs, duties, and other taxes, fees, assessments or charges of any kind, together with all interest, additions to tax and penalties relating thereto.

“Tax Return” means any return, report, declaration, form, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Third Party Claims” is defined in Section 6.3(c).

“Threshold Amount” is defined in Section 6.6(b).

“Title Company” is defined in Section4.5.

“Title Policies” is defined in Section 8.16.

“Trademark Assignment” is defined in Section 2.2(a)(iii).

“Trademark License” is defined in Section 2.2(a)(vi).

“Transfer Taxes” is defined in Section 8.11(b).

“Transferred Employees” is defined in Section 8.2.

“Transition Services Agreement” is defined in Section 2.2(a)(vii).

“WARN Act” is defined in Section 3.1.20(a).

“Working Capital” means, as of a particular date, with respect to the Business, the amount of those current assets of the Business, on a consolidated basis that are included in the line item categories of current assets specifically identified on Schedule 1.2.1 (b)(i). less the amount of those current liabilities of the Business, on a consolidated basis that are included in the line item categories of current liabilities specifically identified on Schedule l.2.1 (b)(i), in each case, without duplication, and as determined in a manner consistent with the principles used by Seller in the preparation of the Financial Statements.

A-7

Schedule II

Purchaser Knowledge Group

Robert D. Berlin

Russell M. Stidolph

EX-12.1

Exhibit 12.1

Ratio of Earnings to Fixed Charges

	Year Ended December 31,
	2006		2005
Income from continuing operations, before taxes	40,270,275		44,231,318
Fixed charges, as adjusted	67,433,125		49,708,865
	107,703,400		93,940,183
Fixed charges:
Interest expense including amortization of debt costs	49,880,714		33,855,699
Capitalized interest	3,872,940		1,573,991
Interest factor on rent (1/3 rent expense)	17,552,411		15,853,166
Total fixed charges	71,306,065		51,282,856
Less capitalized interest	(3,872,940	)	(1,573,991	)
Fixed charges, as adjusted	67,433,125		49,708,865
Ratio of earnings to fixed charges	1.5		1.8

EX-21

EXHIBIT 21

LANDRY’S RESTAURANTS, INC.

LIST OF SUBSIDIARIES (2006)

C. A. Muer Corporation

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

CHLN, Inc.

CHLN-Maryland, Inc.

Crab House, Inc.

Cryo Realty Corp.

FSI Devco, Inc.

FSI Restaurant Development Limited

GNL, CORP.

GNLV, CORP.

Golden Nugget Experience, LLC

Golden Nugget, Inc.

Hospitality Headquarters, Inc.

Houston Aquarium, Inc.

Inn at the Ballpark Catering, Inc.

Island Entertainment, Inc.

Island Hospitality, Inc.

Landry’s Crab Shack, Inc.

Landry’s Development, Inc.

Landry’s Downtown Aquarium, Inc.

Landry’s G.P., Inc.

Landry’s Gaming, Inc.

Landry’s Harlows, Inc.

Landry’s Limited, Inc.

Landry’s Management, L.P.

Landry’s New York Grotto Development Corp. 2005, Inc.

Landry’s Pesce, Inc.

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

Landry’s Seafood House—Alabama, Inc.

Landry’s Seafood House—Arlington, Inc.

Landry’s Seafood House—Biloxi, Inc.

Landry’s Seafood House—Colorado, Inc.

Landry’s Seafood House—Florida, Inc.

Landry’s Seafood House—Lafayette, Inc.

Landry’s Seafood House—Memphis, Inc.

Landry’s Seafood House—Minnesota, Inc.

Landry’s Seafood House—Missouri, Inc.

Landry’s Seafood House—Nevada, Inc.

Landry’s Seafood House—New Mexico, Inc.

Landry’s Seafood House—New Orleans, Inc.

Landry’s Seafood House—North Carolina, Inc.

Landry’s Seafood House—Ohio, Inc.

Landry’s Seafood House—San Luis, Inc.

Landry’s Seafood House—South Carolina, 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 Inn & Oyster Bar II, Inc.

Landry’s Seafood Inn & Oyster Bar, Inc.

Landry’s Seafood Kemah, Inc.

Landry’s Trademark, Inc.

LCH Acquisition, Inc.

LCHLN, Inc.

LGE, Inc.

LSRI Holdings, Inc.

Marina Acquisition Corporation of Florida, Inc.

Nevada Aquarium, Inc.

Ocean Blue Industries, Inc.

Rainforest Cafe Canada Holdings, Inc.

Rainforest Cafe, Inc.

Rainforest Cafe, Inc.—Baltimore County

Rainforest Cafe, Inc.—Cha Cha

Rainforest Cafe, Inc.—Kansas

Rainforest Trademark, Inc.

Saltgrass, Inc.

Seafood Holding Supply, Inc.

Summit Aircraft Services, Inc.

Summit One Network, Inc.

Summit Seafood Supply, Inc.

Summit Supply, Inc.

T-Rex Cafe—Kansas City, Inc.

T-Rex Cafe—Orlando, Inc.

T-Rex Cafe, Inc.

West End Seafood, Inc.

Willie G’s Galveston, Inc.

Willie G’s Post Oak, Inc.

WSI Fish Limited

Yorkdale Rainforest Restaurants, Inc.

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We have issued our reports dated August 9, 2007, accompanying the consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting included in the Annual Report of Landry’s Restaurants, Inc. on Form 10-K for the year ended December 31, 2006. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Landry’s Restaurants, Inc. on Form S-3 (File No. 333-75886 relating to the Company’s shelf registration statement) and on Forms S-8 (File Nos. 333-113438 relating to the Company’s 2003 Equity Incentive Plan, 333-104175 relating to the Company’s 2002 Employee/Rainforest Conversion Plan and the Company’s 2002 and 2001 Employee Agreements, 333-93173 relating to the Company’s Amended and Restated 1995 Flexible Incentive Plan, 333-02862 relating to the Company’s Stock Option Plan, 333-02854 relating to the Company’s 1995 Flexible Spending Plan, 333-81007 relating to the Company’s 1993 Stock Option Plan, and 333-76500 relating to the Company’s 1993 Stock Option Plan for Non-Employee Directors).

/s/ Grant Thornton LLP

Houston, Texas

August 9, 2007

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

(c) 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

(d) 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.

Dated: August 9, 2007

/S/ Tilman J. Fertitta

Tilman J. Fertitta

Chairman of the Board, President and

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION WITH RESPECT TO ANNUAL REPORT OF

LANDRY’S RESTAURANTS, INC.

I, Rick H. Liem, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

(c) 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

(d) 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.

Dated: August 9, 2007

/S/    Rick H. Liem

Rick H. Liem

Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION WITH RESPECT TO ANNUAL REPORT OF

LANDRY’S RESTAURANTS, INC.

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of title 18, United States Code), each of the undersigned officers of Landry’s Restaurants, Inc. (the “Company”), does hereby certify to such officer’s knowledge that:

The Annual Report on Form 10-K for the year ended December 31, 2006 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K.

Date: August 9, 2007

/S/    Tilman J. Fertitta

Tilman J. Fertitta

Chairman of the Board, President and

Chief Executive Officer

/S/    Rick H. Liem

Rick H. Liem

Executive Vice President and

Chief Financial Officer

[The foregoing certification is being furnished as an exhibit to the Form 10-K pursuant to Item 601 (b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Sections 1350, Chapter 63 of the Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-K for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.]