<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998.
Commission file number 000-22150
------------
LANDRY'S SEAFOOD RESTAURANTS, INC.
----------------------------------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 74-0405386
------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Post Oak Blvd., Suite 1010, Houston, Texas 77056
-------------------------------------------------------------
(Address of principal executive offices)
(713) 850-1010
---------------------------------------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of November 9, 1998 there were
30,345,290 shares of $0.01 par value
common stock outstanding.
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
INDEX
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PAGE
PART I. FINANCIAL INFORMATION NUMBER
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 1. Financial Statements 2
Condensed Unaudited Consolidated Balance Sheets at September 30, 1998 and
December 31, 1997 3
Condensed Unaudited Consolidated Statements of Income for the Three
Months and Nine Months ended September 30, 1998 and September 30, 1997 4
Condensed Unaudited Consolidated Statements of Stockholders' Equity
for the Nine Months Ended September 30, 1998 5
Condensed Unaudited Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1998 and September 30, 1997 6
Notes to Condensed Unaudited Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11-16
- -------------------------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- -------------------------------------------------------------------------------------------------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
- -------------------------------------------------------------------------------------------------
Signatures 18
- -------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying condensed unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Company, all
adjustments (consisting only of normal recurring entries) necessary for fair
presentation of the Company's results of operations, financial position and
changes therein for the periods presented have been included.
2
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
- ------ ------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 41,551,439 $ 17,234,130
Accounts receivable--trade and other 13,425,552 8,381,965
Inventory 22,564,497 28,224,551
Other current assets 10,374,368 8,361,755
------------ ------------
Total current assets 87,915,856 62,202,401
PROPERTY AND EQUIPMENT, net 414,531,663 313,341,200
GOODWILL, net of amortization of $1,217,000 and $1,120,000, respectively 2,877,197 2,933,590
OTHER ASSETS, net 4,225,364 3,804,294
------------ ------------
Total assets $509,550,080 $382,281,485
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 16,608,753 $ 18,050,183
Accrued liabilities 14,391,395 9,022,274
Income taxes payable 9,682,727 ---
Current portion of long-term notes and other obligations 78,225 71,819
------------ ------------
Total current liabilities 40,761,100 27,144,276
LONG-TERM NOTES AND OTHER OBLIGATIONS,
NON-CURRENT 25,175,218 50,234,528
DEFERRED INCOME TAXES & OTHER LIABILITIES 7,621,698 8,164,954
------------ ------------
Total liabilities 73,558,016 85,543,758
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 2,000,000 shares authorized,
-0- and 2,702 issued and outstanding, respectively - 27
Common stock, $0.01 par value, 60,000,000 shares authorized,
30,345,290 and 26,004,449 issued and outstanding, respectively 303,453 260,044
Additional paid-in capital 363,162,948 250,935,805
Retained earnings 72,525,663 45,541,851
------------ ------------
Total stockholders' equity 435,992,064 296,737,727
------------ ------------
Total liabilities and stockholders' equity $509,550,080 $382,281,485
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
consolidated financial statements.
3
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
September 30, September 30,
1998 1997 1998 1997
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUES: $109,352,503 $89,807,731 $310,436,071 $235,290,982
OPERATING COSTS AND EXPENSES:
Cost of sales 32,916,061 27,592,948 93,664,137 72,190,678
Restaurant labor 29,873,491 22,958,261 81,272,949 60,374,500
Other restaurant operating expenses 23,513,687 18,755,733 65,010,389 49,444,683
Depreciation and amortization 7,134,434 4,769,967 19,908,524 11,923,349
General and administrative expenses 4,451,460 2,693,761 10,709,055 7,538,746
------------ ----------- ------------ ------------
Total operating costs and expenses 97,889,133 76,770,670 270,565,054 201,471,956
------------ ----------- ------------ ------------
OPERATING INCOME 11,463,370 13,037,061 39,871,017 33,819,026
OTHER (INCOME) EXPENSE:
Interest (income) expense, net (371,338) (251,980) (1,329,326) (1,004,930)
Other, net 250,003 (108,294) 12,277 (129,993)
------------ ----------- ------------ ------------
Total other (income) expense (121,335) (360,274) (1,317,049) (1,134,923)
------------ ----------- ------------ ------------
INCOME BEFORE INCOME TAXES 11,584,705 13,397,335 41,188,066 34,953,949
PROVISION FOR INCOME TAXES 3,996,300 4,823,036 14,204,254 12,583,416
------------ ----------- ------------ ------------
NET INCOME $ 7,588,405 $ 8,574,299 $ 26,983,812 $ 22,370,533
============ =========== ============ ============
NET INCOME PER SHARE - BASIC $0.25 $0.33 $0.93 $0.88
============ =========== ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 30,350,000 25,600,000 29,117,000 25,400,000
============ =========== ============ ============
NET INCOME PER SHARE - DILUTED $0.25 $0.32 $0.91 $0.85
============ =========== ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARE AND COMMON SHARE
EQUIVALENTS OUTSTANDING - DILUTED 30,350,000 26,920,000 29,700,000 26,350,000
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
consolidated financial statements.
4
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
----------------- --------------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
------- ------- ---------- --------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 2,702 $27 26,004,449 $260,044 $250,935,805 $45,541,851 $296,737,727
Net income -- -- -- -- -- 26,983,812 26,983,812
Exercise of stock options
and income tax benefit -- -- 527,189 5,272 9,954,053 -- 9,959,325
Conversion of preferred
stock into common stock (2,702) (27) 2,702 27 -- -- --
Issuance of common stock,
net of offering costs -- -- 3,810,950 38,110 102,273,090 -- 102,311,200
------- ------ ---------- -------- ----------- ---------- -----------
Balance, September 30, 1998 -- $ -- 30,345,290 $ 303,453 $363,162,948 $72,525,663 $435,992,064
======= ====== ========== ========= ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these condensed unaudited
consolidated financial statements.
5
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
September 30,
1998 1997
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 26,983,812 $ 22,370,533
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization 19,908,524 11,923,349
Change in assets and liabilities-net and other 11,890,339 16,475,394
------------- -------------
Total adjustments 31,798,863 28,398,743
------------- -------------
Net cash provided by operating activities 58,782,675 50,769,276
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (118,101,272) (107,272,447)
Other assets, including goodwill (553,597) (817,160)
------------- -------------
Net cash used in investing activities (118,654,869) (108,089,607)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and other long-term obligations (32,552,904) (141,497)
Borrowings on notes payable 7,500,000 15,000,000
Net proceeds from sale of common stock 102,273,090 ---
Proceeds from exercise of stock options 6,969,317 7,079,395
------------- -------------
Net cash provided by financing activities 84,189,503 21,937,898
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 24,317,309 (35,382,433)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 17,234,130 57,267,986
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,551,439 $ 21,885,553
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments during the period for--
Interest $ 1,512,000 $ 290,000
Income taxes $ 1,817,000 $ 421,000
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
6
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial statements included herein have been prepared by the Company
without audit, except for the consolidated balance sheet as of December 31,
1997. The financial statements include all adjustments, consisting of normal,
recurring adjustments and accruals, which the Company considers necessary for
fair presentation of its financial position and results of operations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. This information is contained in the Company's December
31, 1997, consolidated financial statements filed with the Securities and
Exchange Commission on Form 10-K.
Cash and Cash Equivalents
For purposes of the condensed statements of cash flows, the Company considers
all highly liquid investments with original maturities of three months or less
to be cash equivalents.
Goodwill and Non-Compete Agreements
Goodwill and non-compete agreements are amortized over 30 years and 15 years
(or the life of the related agreement), respectively.
Earnings per Share
Net income per common share has been computed in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." Basic EPS
is computed by dividing net income by the weighted average number of shares of
common stock outstanding during the year. Diluted EPS is computed using the
average share price for the period in all cases when applying the treasury stock
method to potentially dilutive outstanding options.
7
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
New Accounting Principles
In April 1998 the American Institute of Certified Public Accountants issued a
new accounting standard under Statement of Position 98-5 "Reporting on the Costs
of Start-Up Activities". This new accounting standard, upon adoption, requires
Companies to expense pre-opening costs as incurred and to expense previously
capitalized pre-opening costs as a cumulative effect of a change in accounting
principle. The Company may adopt this new accounting standard in the fourth
quarter of 1998, or in the first quarter of 1999. At September 30, 1998,
unamortized pre-opening costs were $6,263,000, which balances at the date of
adoption will be expensed.
2. Accounts Receivable Trade and Other
Accounts receivable at September 30, 1998 includes an estimated $5,065,000
recoverable from an insurance company related to property damage and business
interruption claims during 1998. Revenues for the three and nine months ended
September 30, 1998 include an estimated $525,000 and $925,000, respectively,
related to business interruption claims during 1998. The property damage and
business interruption claims relate to a restaurant destroyed by fire in
February 1998, and partial damage to six of the Company's restaurants caused by
Tropical Storm Frances hitting the Texas Gulf Coast in September 1998. Two of
the six restaurants damaged by the storm remained temporarily closed at
September 30, 1998. The Company expects to collect the amounts recoverable from
the insurance company by the end of the first quarter of 1999.
3. Accrued Liabilities
Accrued liabilities are comprised of the following:
September 30, 1998 December 31, 1997
------------------ -----------------
Payroll and related costs $ 4,800,343 $2,166,035
Deferred and state income taxes 675,000 974,279
Taxes, other than payroll and income taxes 5,117,732 4,001,719
Other 3,798,320 1,880,241
----------- ----------
$14,391,395 $9,022,274
=========== ==========
4. Debt
The Company has a $125 million unsecured credit facility from a syndicate of
banks which expires in June 2000, and is available for expansion, acquisitions
and general corporate purposes. Interest on the credit facility is generally
payable quarterly at the Eurodollar rate plus 0.6% or the bank's base rate. The
credit facility is governed by certain financial covenants, including minimum
8
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
tangible net worth, a maximum leverage ratio and a minimum fixed charge coverage
ratio. At September 30, 1998 the Company had $25,000,000 outstanding under this
credit facility at an approximate interest rate of 6.3%.
5. Stockholders' Equity
In March 1998, the Company completed a public offering of 3,810,950 shares of
the Company's Common Stock. Net proceeds of the common stock offering, of
approximately $102,400,000, has been used to repay outstanding bank loans,
finance expansion and for general corporate purposes.
A reconciliation of the amounts used to compute net income per common share -
diluted is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income................................... $ 7,588,405 $ 8,574,299 $26,983,812 $22,370,533
=========== =========== =========== ===========
Weighted Average Common Shares Outstanding... 30,350,000 25,600,000 29,117,000 25,400,000
Dilutive Common Stock Equivalents -- Stock
Options..................................... 0 1,320,000 583,000 950,000
----------- ----------- ----------- -----------
Weighted Average Common and Common
Equivalent Shares Outstanding -- Diluted.... 30,350,000 26,920,000 29,700,000 26,350,000
=========== =========== =========== ===========
Net Income Per Share -- Diluted.............. $ 0.25 $ 0.32 $ 0.91 $ 0.85
=========== =========== =========== ===========
</TABLE>
6. Contingencies
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Management believes, based on discussions with
its legal counsel and in consideration of reserves recorded, that the outcome of
all legal actions will not have a material adverse effect upon the consolidated
financial position and results of operations of the Company.
7. Year 2000
The Company recognizes the need to insure that its operations will not be
adversely impacted by year 2000 software failures. The Company is currently
working to resolve the potential impact of the year 2000 issue on the processing
of date-sensitive information by the Company's computerized
9
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
information systems. The year 2000 problem is the result of computer programs
being written using two digits (rather than four) to define the applicable year.
Any of the Company's programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could result
in miscalculations or system failures. Based on preliminary information, costs
of addressing potential problems are not currently expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in future periods. However, if the Company, or its vendors are unable
to resolve such processing issues in a timely manner, it could result in a
material financial risk. Accordingly, the Company plans to devote the necessary
resources to resolve all significant year 2000 issues in a timely manner.
8. Related Party
The Company entered into an agreement with 610 Loop Venture, LLC, a company
wholly owned by the Chairman and Chief Executive Officer of Landry's, whereby,
the Company would sell to 610 Loop Venture, a 4-acre undeveloped land tract at
a third-party appraised value of $5,360,000, and 610 Loop Venture would
construct a condominium project on the land. Such condominium project will
contain, among other things, a hotel unit, owned by 610 Loop Venture, and a 4-
story, 83,000 square foot office facility. The office facility will be purchased
by Landry's for a third-party appraised value of $14,840,000. At the completion
of the project, a condominium regime agreement will be entered into between
Landry's and 610 Loop Venture, who will operate and manage the project.
10
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The Company owns and operates full-service, casual dining seafood restaurants.
As of September 30, 1998 the Company operated approximately 150 restaurants. In
addition, the Company operates three limited menu take-out service units.
The Company closed two restaurants during the three months ended March 31,
1998. A Houston area restaurant closed due to an electrical fire. The restaurant
is currently being rebuilt and a majority of the construction costs are covered
by insurance. The proceeds from business interruption insurance will replace the
restaurant's lost profits during the construction period. Additionally, the
Company decided not to renew a lease for a Crab House restaurant located in a
hotel in Key West, Florida.
From time to time one or more of the Company's restaurants may be temporarily
closed for remodeling and conversion to one of the Company's other restaurant
concepts in order to improve the consumer appeal.
The Company's 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 national and regional
economic growth. The recent enactment of staged increases to federally mandated
minimum wage has increased the Company's labor costs.
The Company may record a non-recurring charge in 1998 related to a possible
fourth quarter adoption of a new accounting standard requiring the expensing of
pre-opening costs. Moreover, the Company is evaluating certain restaurant
locations, which the Company may exit. Such evaluation, which is expected to be
completed in the fourth quarter, may result in a write-down of net book value to
estimated realizable value, and certain special non-recurring charges in the
fourth quarter.
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, weather
conditions, and the type, number, and location of competing restaurants. The
Company has many well established competitors with greater financial resources
and longer histories of operation than the Company, including competitors
already established in regions into which the Company is planning to expand, as
well as competitors planning to expand in the same regions. The Company faces
significant competition from mid-priced, full-service, casual dining restaurants
offering seafood and other types and varieties of cuisine. The Company's
competitors include national, regional, and local chains as well as local owner-
operated restaurants. The Company also competes with other restaurants and
retail establishments for restaurant sites.
11
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which are intended to be covered
by the safe harbors created thereby. Investors are cautioned that all forward-
looking statements involve risks and uncertainty, including without limitation,
the ability of the Company to continue its expansion strategy, changes in costs
of food, labor, and employee benefits, the ability of the Company to continue to
acquire prime locations at acceptable lease or purchase terms, the ability of
the Company to resolve all of its year 2000 issues, as well as general market
conditions, competition, and pricing. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this report will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997
Revenues increased $19,544,772, or 21.8%, from $89,807,731 to $109,352,503 in
the three months ended September 30, 1998, compared to the three months ended
September 30, 1997. The increase in revenues was attributable to revenues from
new restaurant openings. However, total sales for the quarter were below the
Company's internal sales forecast model. Same store sales for the third quarter
declined by approximately 9%, largely impacted by summer tropical storms, as the
Company directly lost approximately 100 restaurant days. Other factors include,
(i) the Company's decision to add new units (i.e. back fill) in existing
markets, and (ii) an increase in the number of the newer Joe's restaurants
entering the same store sales base with declines from initial honeymoon volumes.
The Company's overall average weekly unit sales declined approximately 12%
during the three months ended September 30, 1998 compared to 1997, due primarily
to the decline in same store sales, and reduced proportional effect of new store
"honeymoon" sales. Continued decreases in same store sales and overall average
unit sales will decrease the Company's restaurant profitability.
As a primary result of increased revenues, cost of sales increased $5,323,113,
or 19.3%, from $27,592,948 to $32,916,061 in the three months ended September
30, 1998 compared to the same period in the prior year. Cost of sales as a
percentage of revenues for the three months ended September 30, 1998 decreased
to 30.1% from 30.7% in 1997. The decrease in cost of sales as a percentage of
revenues reflects improved pricing and good management cost controls in 1998.
Restaurant labor expenses increased $6,915,230, or 30.1%, from $22,958,261, to
$29,873,491 in the three months ended September 30, 1998 compared to the same
period in the prior year. Restaurant labor expenses as a percentage of revenues
for three months ended September 30, 1998, increased 1.7% from 25.6% to 27.3%.
The Company continues to experience labor cost pressures attributable in part to
increases in federally mandated minimum wages, an increase in restaurant manager
turnover, and declines in average weekly sales comparisons. The Company is
considering
12
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
several strategic programs to increase restaurant manager and employee
recruitment and retention. Among the variety of programs being considered are
medical benefits for hourly employees, retention or seniority type bonuses for
managers, and other increases in compensation. The Company expects labor related
costs to increase as a percentage of revenues during the remainder of 1998 and
1999.
Other restaurant operating expenses increased $4,757,954, or 25.4%, from
$18,755,733 to $23,513,687 in the three months ended September 30, 1998,
compared to the same period in the prior year, as a result of increased revenues
from the opening of new restaurants since September 30, 1997. Such expenses
increased as a percentage of revenues to 21.5% from 20.9% primarily due to
declines in average weekly sales comparisons. Additionally, the Company expects
to increase its marketing related expenditures to stimulate restaurant revenues.
Depreciation and amortization expenses increased $2,364,467, or 49.6%, from
$4,769,967 to $7,134,434 in the three months ended September 30, 1998 compared
to the same period in the prior year. The dollar increase was primarily due to
the addition of new restaurants and purchases of new equipment. Depreciation
and amortization as a percentage of revenues for the three months ended
September 30, 1998 increased to 6.5% from 5.3% during the same period in 1997,
due to an increase in pre-opening amortization expense during the three months
ended September 30, 1998, and declines in average weekly sales comparisons
whereby the fixed expense leverage is reduced. The increase in pre-opening
amortization expense is attributable to an increase in the relative number of
units subject to amortization and an increase in the per unit pre-opening
expenses.
General and administrative expenses increased $1,757,699, or 65.3%, from
$2,693,761 to $4,451,460 in the three months ended September 30, 1998 compared
to the same period of the prior year, and increased as a percentage of revenues
to 4.1% from 3.0%. The dollar increase resulted primarily from increased
personnel, salaries and travel to support the Company's expansion plans.
The increase in net interest income of $119,358, and the change in other
(income) expense of $358,297 for the three months ended September 30, 1998 as
compared to the same period in the prior year, was not deemed significant.
Provision for income taxes decreased by $826,736 in the three months ended
September 30, 1998, primarily due to the change in the Company's income. The
provision for income taxes as a percentage of income before income before taxes
decreased to 34.5% from 36% due to the effect of FICA tax tip credits on
reducing the Company's effective tax rate.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30,
1997
Revenues increased $75,145,089, or 31.9%, from $235,290,982 to $310,436,071 in
the nine months ended September 30, 1998 compared to the nine months ended
September 30, 1997. The increase in revenue was attributable to revenues from
new restaurant openings. The Company believes that an unseasonably mild winter
had a positive impact on first quarter sales. However, the same store sales of
restaurants open 18 months or more, while relatively flat for the first quarter,
13
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
declined 6% in the second quarter and 9% in the third quarter. These declines
were believed to be caused by (i) the extreme heat throughout the South and
Southwest, (ii) the Company's decision to add new units (i.e. back fill) in
existing markets, (iii) newer units entering the same store sales base that are
continuing to fall from their initial or honeymoon sales amount, and, (iv) a
relatively large number of tropical storms affecting the Company's restaurant
sales in the third quarter.
As a primary result of increased revenues, cost of sales increased
$21,473,459, or 29.7%, from $72,190,678 to $93,664,137 in the nine months ended
September 30, 1998 compared to the same period in the prior year. Cost of sales
as a percentage of revenues for the nine months ended September 30, 1998
decreased to 30.2%, from 30.7% in 1997. The decrease in cost of sales as a
percentage of revenues reflects improved pricing and good management controls in
1998.
Restaurant labor expenses increased $20,898,449, or 34.6%, from $60,374,500 to
$81,272,949 in the nine months ended September 30, 1998 compared to the same
period in the prior year. Restaurant labor expenses as a percentage of revenues
for the nine months ended September 30, 1998 increased 0.5% from 25.7% to 26.2%.
The Company continues to experience labor cost pressures attributable in part to
increases in federally mandated minimum wages and a recent increase in
restaurant manager turnover.
Other restaurant operating expenses increased $15,565,706, or 31.5%, from
$49,444,683 to $65,010,389 in the nine months ended September 30, 1998 compared
to the same period in the prior year, as a result of increased revenues and the
opening of new restaurants since September 30, 1997. Such expenses remained
relatively flat, decreasing 0.1% as a percentage of revenues to 20.9% from
21.0%.
Depreciation and amortization expenses increased $7,985,175, or 67%, from
$11,923,349 to $19,908,524 in the nine months ended September 30, 1998 compared
to the same period in the prior year. The dollar increase was primarily due to
the addition of new restaurants and purchases of new equipment. Depreciation
and amortization as a percentage of revenues for the nine months ended September
30, 1998 increased to 6.4% from 5.1% during the same period in 1997 primarily
due to an increase in pre-opening amortization expense and declines in average
weekly sales comparisons during the nine months ended September 30, 1998. The
increase in pre-opening amortization expense is attributable to an increase in
the relative number of units subject to amortization and an increase in the per
unit pre-opening expenses.
General and administrative expenses increased $3,170,309, or 42.1%, from
$7,538,746 to $10,709,055 in the nine months ended September 30, 1998 compared
to the same period in the prior year, and increased as a percentage of revenues
to 3.4% from 3.2%. The dollar increase resulted primarily from increased
personnel, salaries and travel to support the Company's expansion plans.
The increase in net interest income of $324,396 and the change in other
(income) of $142,270 in the nine months ended September 30, 1998 as compared to
the same period in the prior year was not deemed significant.
14
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
Provision for income taxes increased by $1,620,838 from $12,583,416 in 1997 to
$14,204,254 in 1998 primarily due to the change in the Company's income. The
provision for income taxes as a percentage of income before income taxes
decreased to 34.5% from 36% due to the effect of FICA tax tip credits on
reducing the Company's effective tax rate.
Liquidity and Capital Resources
For the nine months ended September 30, 1998 the capital expenditures of the
Company were approximately $118,285,000 which were funded out of existing cash
balances, proceeds from stock offerings, cash flow from operations and
borrowings.
In March 1998, the Company completed a public offering of 3,810,950 shares of
the Company's common stock. Net proceeds of the common stock offering, of
approximately $102,400,000 has been used to repay outstanding bank loans,
finance expansion and for general corporate purposes.
The Company has a $125 million line of credit from a syndicate of banks which
expires in June 2000. The line of credit is available for expansion,
acquisitions and general corporate purposes. At September 30, 1998, the Company
had $25 million outstanding under this credit facility at an approximate
interest rate of 6.3% and had cash and cash equivalent balances aggregating
approximately $41.6 million. These borrowings were used to fund capital
expenditures and working capital.
The Company's current development plans are to open approximately 40
restaurants during 1998, and 13 to 15 restaurants in 1999. The 1999 restaurant
development has been reduced from previous plans as the Company believes that an
increase in focus on the Company's existing operations of approximately 150
restaurants is prudent.
During 1997 the Company commenced construction on a development plan for a
waterfront area in South Houston (the "Kemah Development"). The Kemah
Development includes up to eight restaurant sites, a 56 room hotel, connected
public areas and plaza, four amusement/entertainment rides, and light retail
facilities. The Company currently operates six restaurants in this development
and expects to open a 56 room hotel, amusement facilities, and retail shops,
(some of which will be leased and operated by third parties) by the end of the
fiscal year.
Exclusive of any acquisitions or large real estate purchases, the Company
currently expects to incur capital expenditures of up to $135 million in 1998
(based upon approximately 40 new restaurants), depending upon the actual number
and timing of restaurant construction, the number of land purchases, the amount
of expenditures spent on conversions, remodels, and the mix of leased, owned or
conversion type locations. The Company expects that its average per unit
investment, excluding real estate costs, capitalized interest costs and pre-
opening expenses, to approximate $2.0 million. However, individual unit
investment costs can vary from management's expectations due to a variety of
factors. Moreover, average unit investment costs are dependent upon many
factors, including competition for sites, location, construction costs, unit
size and the mix of conversions, build-to-suit, leased and fee-owned locations.
The Company currently anticipates that it will continue to purchase a portion of
its new restaurant locations, which are expected to be more costly than leased
locations.
15
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LANDRY'S SEAFOOD RESTAURANTS, INC.
Separately, the Company may spend up to $25 million on the Kemah Development and
up to $10-$12 million on the corporate headquarters development, both of which
will be spread over the next several fiscal years. The Company believes that
existing cash balances, cash generated from operations and potential financing
sources will be sufficient to satisfy the Company's working capital and planned
capital expenditures through 1999.
The Company is reviewing possible scenarios which would be intended to
increase shareholder value.
Seasonality and Quarterly Results
The Company's business is seasonal in nature, with revenues and, to a greater
degree, operating profits being lower in the first and fourth quarters than in
other quarters due to the Company's reduced winter volumes. The Company has and
continues to open restaurants in highly seasonal tourist markets and has further
noted that the Joe's Crab Shack concept restaurants tend to experience even
greater seasonality and sensitivity to weather. During the Company's 1998 third
quarter, the Company's restaurant operations, revenues and profitability were
negatively affected by a series of 4 tropical storms in the Gulf Coast and Mid-
Atlantic areas of the United States. The timing of unit openings can and will
affect quarterly results. The Company anticipates moderation in revenues from
the initial volumes of new units.
Impact of Inflation
Management does not believe that inflation has had a significant effect on the
Company's operations during the past several years. Management believes the
Company has historically been able to pass on increased costs through menu price
increases, but there can be no assurance that it will be able to do so in the
future. Future increases in restaurant labor costs, land and construction costs
could adversely affect the Company's profitability and ability to expand.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which registrant is a
party or of which any of the property of the registrant is the subject,
except for claims in the ordinary course of business, none of which are
considered material.
ITEM 2. CHANGES IN SECURITIES Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.1 Contract of Sale and Development Agreement
10.2 Executive Employment Agreements
10.3 First Amendment to Credit Agreement
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K - NONE
17
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Landry's Seafood Restaurants, Inc.
(Registrant)
/s/ Tilman J. Fertitta
___________________________
Tilman J. Fertitta
Chairman of the Board of Directors
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Paul S. West
___________________________
Paul S. West
Vice President-Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: November 12, 1998
18
<PAGE>
EXHIBIT 10.1
CONTRACT OF SALE
----------------
AND DEVELOPMENT AGREEMENT
-------------------------
This Contract of Sale and Development Agreement (the "AGREEMENT") is
entered into as of this 17th day of August, 1998 (the "EFFECTIVE DATE"), by and
between 610 Loop Venture, LLC, a Texas limited liability company ("SELLER"),
and LANDRY'S MANAGEMENT, L.P., a Delaware limited partnership (PURCHASER").
RECITALS
--------
A. Purchaser owns fee title to a certain parcel of land located in the
City of Houston, Harris County, Texas (hereinafter the "LAND") which is more
particularly described on Exhibit "A" attached hereto and by this reference
incorporated herein.
B. Seller desires to construct a condominium project on the Land which
will contain, among other things (i) a HOTEL UNIT (herein so called) consisting
of a 10 story, 250 hotel room hotel with a conference center, ballroom space,
meeting space, health spa and other related retail facilities, (ii) an OFFICE
UNIT (herein so called) consisting of a 4 story, 83,000 gross square foot office
facility, and (iii) common elements including, without limitation, a parking
garage (all of the foregoing being herein collectively called the "PROJECT").
C. Purchaser desires to purchase the Office Unit, including an undivided
interest in the common elements appurtenant thereto and the exclusive rights to
use the limited common elements appurtenant thereto (collectively, the
"PROPERTY") at such time as the Project has been completed.
D. Purchaser is willing to (i) sell the Land to Seller on or before
March 31, 1999 (the "Primary Closing Date") or (ii) to grant Seller a temporary
construction easement to use the Land for the purposes of constructing the
Project and sell the Land to Seller at any time Seller desires to acquire same
but not later than the Project Closing Date (hereinafter defined). In the event
Seller acquires the Land after the Primary Closing Date then the date on which
Seller acquires the Land is herein called the "Deferred Closing Date".
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller agrees to sell to Purchaser
and Purchaser agrees to buy from Seller, the Property, at the price and subject
to the terms, conditions, covenants and agreements set forth herein.
ARTICLE I
PURCHASE PRICE
--------------
1.1 Property Purchase Price. The purchase price for the Property (the
"PURCHASE PRICE") shall be Fourteen Million Eight Hundred Forty Thousand and
No/100 Dollars ($14,840,000.00) which Purchase Price shall not be increased
unless Purchaser requests changes in the size, configuration or quality of the
Office Unit, in which event the Purchase Price shall be increased by
<PAGE>
the cost of such changes as agreed to in writing by Seller and Purchaser at the
time such changes are requested by Purchaser.
1.2 Land Purchase Price Adjustment. The purchase price for the Land (the
"Land Price") shall be Five Million Three Hundred Sixty Thousand and No/100
Dollars ($5,360,000.00) if the Land is purchased on the Primary Closing Date. If
the Land is conveyed on the Deferred Closing Date, then the Land Price shall be
adjusted upward by the sum of (i) all taxes, assessments and other direct
expenses of owning and insuring the Land incurred by Purchaser after the Primary
Closing Date (collectively, the "Ownership Costs"), plus (ii) interest on the
Land Price from the Primary Closing Date until the Deferred Closing Date, plus
(iii) interest on the Ownership Costs expended by Purchaser from the date, in
each case, of expenditure until the Deferred Closing Date. Interest will be
calculated at a rate equal to seven percent (7%) per annum. In the event Seller
elects to do so, it may pay the Ownership Costs as the same are incurred, in
which event the Land Price shall not be adjusted for Ownership Costs or the
interest applicable to same.
1.3 Payment of Land Price. At such time as the Land is acquired by
Seller, then Seller shall pay, in cash or by credit as provided in Section 1.4
of this Contract, either the Land Price if the Land is acquired on the Primary
Closing Date or the Land Price as adjusted in the manner set forth in
Section 1.2 of this Contract if the Land is acquired on the Deferred Closing
Date and Purchaser shall convey fee simple title to the Land to Seller subject
only to the Permitted Exceptions (hereinafter defined).
1.4 Payment of Purchase Price. On the Project Closing Date Seller shall
convey fee simple title to the Property to Purchaser in the manner hereinafter
provided and subject only to the Project Permitted Exceptions (hereinafter
defined) and Purchaser shall pay the Purchase Price, in cash; however, if Seller
is simultaneously acquiring the Land then Purchaser shall convey the Land to
Seller, prior to the conveyance by Seller of the Office Unit, and receive a
credit against the Purchase Price in an amount equal to the Land Price as
adjusted in the manner set forth in Section 1.2 hereof.
ARTICLE II
PRE-DEVELOPMENT STAGE:
---------------------
TITLE, CERTAIN CONDITIONS
-------------------------
2.1 Title Binder. Within 10 days after the Effective Date, Seller may, at
its cost, obtain from a title insurance company selected by Seller (the "Title
Company") a current commitment for title insurance (the "TITLE COMMITMENT"),
setting forth the state of title to the Land, together with all exceptions or
conditions to such title, including, without limitation, all easements,
restrictions, rights-of-way, covenants, reservations, and all other liens or
encumbrances affecting the Land which would appear in an owner's title policy,
if issued. The Title Commitment shall be accompanied by legible copies of all
instruments referred to in the Title Commitment as exceptions to title.
2
<PAGE>
2.2 Survey. Within 10 days after the Effective Date, Seller may, at its
cost, obtain a current plat of survey (the "SURVEY") of the Land.
2.3 Title. Seller has no objection to the title exceptions set forth on
Exhibit "B", as well as any liens, encumbrances, easements or other matters
imposed on the Land by Purchaser at Seller's request, the "PERMITTED
EXCEPTIONS."
2.4 Title Insurance Policy Covering the Land. If Seller desires to obtain
same, at Seller's sole cost and expense, at Closing, or Deferred Closing, the
Title Company shall issue to Seller the Title Policy in the amount of the Land
Purchase Price insuring good and indefeasible title to the Land subject to the
Permitted Exceptions. The Title Policy shall contain no exceptions to title to
the Land other than the Permitted Exceptions and the standard printed exceptions
contained in Schedule B of Texas State Board of Insurance Form T-I modified as
follows:
(a) The exception relating to restrictions against the Land shall not
include any restrictions which are not Permitted Exceptions;
(b) The exception relating to discrepancies, conflicts or shortages in
area or boundary lines, or any encroachment or any overlapping of improvements
which a survey might show shall be modified to delete such exception, except as
to shortages in area;
(c) The exception relating to ad valorem taxes shall except only to taxes
owing for the current and subsequent years and subsequent assessments for prior
years due to change in land usage or ownership; and
(d) There shall be no exception for (i) "parties in possession" or (ii)
yet to be filed materialmen's or mechanic's liens.
2.5 Project Construction. Seller shall be obligated to construct the
Project and substantially complete same by March 31, 2001.
2.6 Title Insurance Policy Covering the Office Unit. At Project Closing,
Seller shall, at Seller's expense, cause the Title Company (which term shall
include any title insurer acceptable to Seller and Purchaser who may handle the
Project Closing) to issue to Purchaser an Owner's Policy of Title Insurance in
the amount of the Purchase Price insuring good and indefeasible title to the
Property, subject to the Project Permitted Exceptions (meaning the Permitted
Exceptions, the Declaration [hereinafter defined], and any easements and other
development rights granted by Seller in connection with the construction of the
Project). Under no circumstances shall an exception be permitted for any liens
securing financing or other indebtedness incurred or permitted by Seller. The
standard printed exceptions in Schedule B of the Texas State Board of Insurance
Form T-1 shall be modified as follows:
(a) The exception relating to restrictions against the Property shall not
include any restrictions which are not Permitted Exceptions;
3
<PAGE>
(b) The exception relating to discrepancies, conflicts or shortages in
area or boundary lines, or any encroachment or any overlapping of improvements
which a survey might show shall be modified to delete such exception, except as
to shortages in area;
(c) The exception relating to ad valorem taxes shall except only to taxes
owing for the current and subsequent years and subsequent assessments for prior
years due to change in land usage or ownership; and
(d) There shall be no exception for (i) "parties in possession" or (ii)
yet to be filed materialmen's or mechanic's liens.
ARTICLE III
DEVELOPMENT STAGE:
------------------
PREPARATION OF FINAL PLANS AND SPECIFICATIONS;
---------------------------------------------
CONSTRUCTION OF PROJECT
-----------------------
3.1 Purchaser's and Seller's Obligations with Respect to Construction of
the Project. Seller, at its expense, will construct the Project in substantial
accordance with the approved Construction Documents (hereinafter defined), in
accordance with the terms of this Agreement (including Exhibit "C" hereof) and
in accordance with the Project Schedule attached hereto as Exhibit "D".
3.2 Plans and Specifications. The Project specifications (the
"PRELIMINARY PLANS") and the site plan for the Project have been approved by
Purchaser and Seller prior to the date of this Agreement, and are attached
hereto as Exhibit "I" and Exhibit "J", respectively, and incorporated herein by
this reference. Preparation and approval of the final Construction Documents
(and any changes thereto) is governed by the terms of Exhibit "C" attached
hereto and made a part hereof.
3.3 General Contractor. The construction of the Project will be performed
by a general contractor selected by Seller and approved by Purchaser (such
approval not to be unreasonably withheld or delayed).
3.4 Completion of Construction of Base Building.
(a) Seller shall commence construction of the Project not later than the
date specified in Exhibit "D" (the "COMMENCEMENT DATE") and shall proceed
diligently with such construction to completion on or before the date specified
in Exhibit "D" (the "SCHEDULED COMPLETION DATE"), as such dates may be adjusted
pursuant to the terms of this Agreement (including Exhibit "D" hereof).
(b) After construction of the Project has commenced, Purchaser will have
the right to inspect the construction work applicable to the Office Unit on a
monthly basis; however, such inspections, if made, shall be for the sole benefit
of Purchaser and shall in no way relieve Seller of
4
<PAGE>
any of its obligations hereunder. Seller will correct any work which is not in
accordance with the Construction Documents or this Agreement.
(c) When Seller reasonably determines that the Project is substantially
completed, the Project Architect shall promptly inspect same, and if the Project
Architect determines that the Project is substantially complete, the Project
Architect shall furnish Purchaser a certificate to that effect, in the form
attached hereto as Exhibit "E" (the "COMPLETION CERTIFICATE"). The date of
issuance of the Completion Certificate shall be the "COMPLETION DATE." If the
Project Architect determines that the Project has not been so completed, the
Project Architect shall specify in what respect the Project has not been so
completed and Seller shall promptly take all reasonable steps necessary to
correct the same and proceed diligently until the Project is substantially
completed whereupon the Project Architect shall issue the Completion
Certificate.
3.5 Change Orders. Subject to the other party's written approval, either
Purchaser, as to the Office Unit only, or Seller may at any time request changes
in the Construction Documents by delivering to either party a written request
for such change signed by such party's architect (a "CHANGE ORDER"). Purchaser
agrees not to unreasonably withhold its consent to any Change Order requested by
Seller, if such change order is necessary or convenient in order to cause the
Project to comply with applicable law. Seller shall not be entitled to any
extensions of time or increases in the Purchase Price as a result of change
orders requested by Seller. Seller agrees not to withhold its consent to any
Change Order requested by Purchaser, if such change will not delay completion of
the Project by more than 30 days. The additional cost, if any, resulting from
Purchaser's (but not Seller's) Change Order shall be paid for by Purchaser
within 10 days after payment for the work contemplated by such Change Order is
requested by the applicable contractor or materialman. If a Change Order
requested by Purchaser results in a decrease in cost, such decrease will be
reflected in an adjustment of the minimum Purchase Price equal to the amount of
such decrease.
3.6 Completion Survey. After the Project has been substantially
completed, but in any case at least 15 days prior to the Project Closing Date,
Seller will cause an updated, "Category 1(A), Condition II" Texas Land Title
Survey of the Project to be prepared and certified to Seller, Purchaser and the
Title Company, such completion survey shall, for all purposes hereunder, become
the "Survey." Such updated Survey must be sufficient to establish the Project
as a condominium in accordance with the provisions of Chapter 82 of the Texas
Property Code (the "Act") and must not show any other exceptions, encroachments
or protrusions other than Permitted Exceptions or any other exceptions, which
are approved in writing by Purchaser, which approval shall not be unreasonably
withheld or delayed.
3.7 Condominium Regime. At least fifteen (15) days prior to the Project
Closing Date, Seller shall prepare and furnish to Purchaser for approval, which
approval shall not be unreasonably withheld, a proposed condominium declaration,
together with all exhibits and unit owners' association documents (collectively,
the "DECLARATION"), sufficient to establish the Project as a condominium in
accordance with the terms of the Act. Such Declaration shall provide for the
establishment of the Hotel Unit and the Office Unit and shall provide, inter
alia, that (i) not less than 200 parking spaces in the parking garage (such
spaces to be in locations acceptable to Purchaser) will be limited common
elements appurtenant to the Office Unit, (ii) the elevator lobby and elevator
5
<PAGE>
which serves the Office Unit exclusively is a limited common element appurtenant
to the Office Unit, and (iii) that the owner of the Hotel Unit will have an
ongoing (a) right of first refusal for a period of thirty (30) days to elect to
purchase the Office Unit upon the same terms and conditions that the owner of
the Office Unit is then willing to sell the Office Unit to a bona fide third
party purchaser in an arms-length transaction and (b) option to lease or
purchase the top floor of the Office Unit at the fair market value upon a change
of control of Landry's Seafood Restaurants, Inc. ("Landry's"), as defined in the
Employment Contract (effective January 1, 1998) between Tilman J. Fertitta and
Landry's. Purchaser shall, within ten (10) days after receipt of the proposed
Declaration, either notify Seller that it has approved same or notify Seller of
Purchaser's specific objections to same. Seller and Purchaser shall resolve any
objections which Purchaser has to the proposed Declaration promptly so as not to
delay the Project Closing Date. Immediately prior to, or on, the Project
Closing Date, Seller shall record the Declaration with respect to the Project
and the Declaration, once recorded, shall be deemed a Permitted Exception.
ARTICLE IV
PROJECT CLOSING:
----------------
CONDITIONS PRECEDENT TO CLOSING; CONVEYANCE
-------------------------------------------
4.1 Purchaser's Condition Precedent. Purchaser's obligations to close the
purchase of the Property shall be conditioned upon the following conditions
precedent:
(a) Project Completion. The Project has been substantially completed in
accordance with the Construction Documents;
(b) Condominium. The Project has been constituted as a condominium regime
in accordance with this Agreement and the Act.
(c) Closing Documents. Seller has delivered into escrow with the Title
Company the closing documents described in Section 4.3 below;
(d) Condemnation. No material part of the Project shall have been taken
in condemnation proceedings and no material part of the project shall have been
transferred in lieu of condemnation. As used above, "material" means such
portion of the Project as to make it economically infeasible for Purchaser to
use the Property for its intended use. In the event any material part of the
Project shall have been taken in condemnation proceedings, then at Purchaser's
option, Purchaser may either (i) terminate this Agreement, or (ii) elect to
purchase the Property, but the Purchase Price shall be reduced by the Office
Unit's undivided common element percentage interest of the amount of the award
and the balance of the award shall be retained by Seller. In the event of a
condemnation in which less than a material part of the Project shall have been
taken the Purchase Price shall be reduced by the Office Unit's undivided common
element percentage interest of the amount of the condemnation award retained by
Seller.
6
<PAGE>
4.2 Seller's Conditions Precedent. Seller's obligations to close the sale
of the Property shall be conditioned upon Purchaser's (i) prior or concurrent
conveyance to Seller of fee simple title to the Land subject only to the
Permitted Exceptions, (ii) payment of the Purchase Price in cash, and (iii)
delivery of the documents described in Section 4.3 below.
4.3 Project Closing Procedures.
(a) The Project Closing shall be held at the offices of the Title Company
on that date which is 15 days after Completion Date or at such other place,
date and time as Purchaser and Seller shall mutually agree (such date herein
called the "PROJECT CLOSING DATE") in the following manner:
(i) Seller shall execute and deliver to Purchaser a good and
sufficient Special Warranty Deed (the "DEED") to the Property in recordable form
conveying good and indefeasible fee simple title and clear of all liens and
encumbrances, except for the Project Permitted Exceptions, (but excluding any
liens securing financing obtained by Seller in connection with the Project) and
all easements and rights appurtenant thereto, such Deed to be in the form
attached hereto as Exhibit "F". The Deed shall be recorded upon the Closing
Date.
(ii) Seller shall furnish to Purchaser, at Seller's expense, an
owner's policy title insurance (the "TITLE POLICY") issued by Title Company in
the manner described in Section 2.6 hereof.
(iii) Seller shall deliver to Purchaser the originals of all permits,
licenses, and approvals necessary for the occupation, use and operation of the
Property, including, without limitation, the certificate of occupancy for the
Office Unit issued by the appropriate governmental authority for the Project;
(iv) Seller shall deliver to Purchaser the originals of all
warranties and guarantees of contractors, subcontractors, suppliers and
materialmen received by Seller in connection with the construction or
installation of the Office Unit Project. Seller shall deliver to Purchaser a
written assignment of such warranties and guarantees, in the form attached
hereto as Exhibit "G" (hereinafter the "ASSIGNMENT OF WARRANTIES").
(v) Seller shall deliver to Purchaser, at Seller's expense, a
complete set of the final "record" Construction Documents both in printed form
and on CAD disks.
(vi) Seller shall duly execute (and acknowledge if appropriate) such
other documents as Purchaser reasonably deems necessary to effectuate this
transaction.
(b) Seller represents and warrants to Purchaser that Seller is not a
"Foreign Person" as defined in Internal Revenue Code (the "I.R.C."
Section 1445(f)(3). Seller shall complete, execute and deliver to Purchaser,
pursuant to I.R.C. Section 1445(B)(2), on or before Closing, a Certificate of
Non-Foreign Status in the form attached hereto as Exhibit "H" and by this
reference incorporated herein.
7
<PAGE>
(c) Subject to the adjustments provided for herein, at Project Closing the
Purchase Price shall be paid in cash or good federal funds by Purchaser to
Seller on or before 1:00 p.m. on the Closing Date.
Costs of Project Closing shall be allocated between Seller and Purchaser as
follows:
(1) Seller shall (i) the premium for the Title Policy (including any
charges for endorsements and deletions), (ii) the cost of the Survey, (iii)
one-half of any escrow fees or similar charges of the Title Company, and
(iv) the costs of obtaining any other items to be delivered by Seller to
Purchaser at Closing. Purchaser shall have the right to waive its rights to
receive the Title Policy and instead receive a credit against the Purchase
Price for the amount of the base premium that Seller would have paid for
said Title Policy.
(2) Purchaser shall pay (i) the cost of recording the Deed and any
other conveyance documents that Purchaser may choose to record, and (ii)
one-half of any escrow fee or similar charges of the Title Company; and
(3) Any expenses, charges and fees of Closing not specifically
allocated herein shall be borne by the party incurring same.
4.4 Prorations. The following items shall be adjusted or prorated between
Seller and Purchaser at the Project Closing effective of the Project Closing
Date:
(a) Ad valorem and similar taxes (including ordinary and special
assessments) for the then current tax period relating to the Project shall be
prorated based on the respective condominium percentages assigned to the Hotel
Unit and Office Unit with Seller paying to Purchaser the portion of the taxes
attributable to the Hotel Unit. Purchaser shall be obligated to pay the taxes
assessed for the year in which the Closing Date occurs. If the Closing occurs
before the tax rate or assessed valuation is fixed for the then current tax
year, the apportionment of taxes shall be made on the basis of the tax rate for
the preceding tax year applied to the latest assessed valuation of the Property,
and when the tax rate and assessed valuation is fixed for the tax year in which
the Closing occurs, Seller and Purchaser hereby agree, one to the other, to
adjust the proration of taxes and, if necessary, to refund or pay such sums to
the other party as shall be necessary to effect such adjustment; and
(b) All other income and operating expenses for or pertaining to the
Property, including, but not limited to, public utility charges, shall be
prorated between Purchaser and Seller at the Project Closing effective for all
purposes as of the Project Closing Date. In the event any such proration is
based upon estimates or cannot be made due to the unavailability of information
at the time of Project Closing, Purchaser and Seller agree to readjust such
proration after Project Closing based upon actual invoices or usage. This
Section 4.4 will survive the Closing.
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4.5 Possession and Occupancy. Exclusive possession of the Property shall
be delivered to Purchaser at Project Closing.
4.6 Casualty Loss. If the Project is damaged by fire or other casualty
before the Closing Date, Seller shall give immediate notice thereof to the
Purchaser. Seller shall be responsible for repairing any damage to the Project
and the Completion Date or Project Closing Date, as applicable, shall be
extended for such reasonable period of time as may be necessary to repair any
such damage.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Seller's Representations and Warranties. Seller makes the following
representations and warranties to the best of its actual knowledge and belief:
(a) Seller is a Texas limited liability company duly organized, and
validly existing under the laws of the State of Texas and has full power to
enter into this Agreement, to execute and deliver the Deed and all other
documents required in this transaction, and to perform all of the terms,
conditions, set forth in such documents. The performance of the terms,
conditions and provisions hereof and as set forth in such documents will not
violate the terms of any contract, agreement, or other document to which Seller
is a party. The acceptance and performance of this Agreement have been duly
authorized and approved by all necessary parties and this Agreement is binding
upon Seller in accordance with its terms.
(b) At Project Closing the Property will be subject to no encumbrances,
defects, liens, or adverse claims except the Permitted Exceptions, and there
will be no leases of any kind or character relating to the Property.
(c) The Project will comply with all environmental, flood control,
planning, building, fire, health, traffic, accessibility, and similar laws,
codes, rules, regulations, ordinances and requirements imposed by any local,
state and federal governmental authority and will not be in violation of any
agreements, covenants, conditions, or restrictions affecting the Property.
(d) Neither the execution of this Agreement, the consummation of the
transactions hereby contemplated, nor the fulfillment of the terms hereof,
will conflict with or result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, any agreement or instrument to
which Seller is a party.
(e) As of the Project Closing Date, the Project will have been
constructed in substantial accordance with the Construction Documents.
(f) At the Project Closing Date, all water, sewer, electric, gas and
telephone serving the Property or required by law or by the normal use and
operation of the Property at the Project Closing
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Date shall be connected to the Property, fully operational, and will be
adequate to serve the Property and to permit full compliance with all
requirements of law and normal usage of the Property.
(g) As of the Project Closing Date, Seller will not have caused the
Property to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Substances (defined
below) or solid waste, except in compliance with all applicable federal, state
and local laws, rules, and regulations, and has not caused except as revealed by
the Environmental Report and any supplements thereto, has no knowledge of the
presence of any Hazardous Substances on the Property. For the purposes of this
Agreement, "HAZARDOUS SUBSTANCES" shall include pollutants or substances defined
as "hazardous waste," "hazardous substances," "hazardous materials," or "toxic
substances" in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") as amended by the Superfund Amendments and
Reauthorization Act of 1986 (PL 99-49); the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq.; the Toxic Substance Control Act, 15 U.S.C.
Section 2601, et seq.; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Section 6901 et seq.; and in the rules or regulations adopted and
guidelines promulgated pursuant to said laws.
(h) As of the Project Closing Date, Seller will have obtained all permits
for the lawful occupancy of the Property.
5.2 Purchaser's Representations and Warranties. Purchaser represents and
warrants that:
(a) Purchaser is a validly existing limited partnership under the laws of
the State of Delaware;
(b) The acceptance and performance of this Agreement have been duly
authorized and approved by all necessary parties and this Agreement is binding
upon Purchaser in accordance with its terms.
5.3 Survival. All representations and warranties described herein shall
survive for a period of two years after Closing.
ARTICLE VI
DEFAULT; REMEDIES
-----------------
6.1 Seller's Breach. Seller shall be considered to be in breach hereunder
upon the occurrence of any one or more of the following events:
(a) Any of Seller's warranties or representations set forth herein is or
becomes untrue in any material respect on or before the Project Closing Date;
(b) Seller fails to commence construction of the Project by June 1, 1999;
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(c) Seller fails, after commencing construction of the Project, to
prosecute such construction with diligence to completion by March 31, 2001; or
(d) Seller fails to meet, comply with, or perform any covenant, agreement,
condition or obligation on its part required under this Agreement other than the
commencement and completion covenants as set forth in Sections 6.1(b) and 6.1(c)
above.
6.2 Purchaser's Remedies. In the event Seller is in default pursuant to
Section 6.1(a) or (d) above and Purchaser has delivered to Seller written notice
of such breach and Seller has failed to cure such breach within 30 days after
such written notice, then a default shall be deemed to have occurred and,
Purchaser may exercise such remedies as are available at law or in equity. In
the event Seller is in default pursuant to Section 6.1(b) or (c) above and
Purchaser has delivered to Seller written notice of such breach and Seller has
failed to cure such breach within 30 days after such written notice, then a
default shall be deemed to have occurred and Purchaser shall be entitled to all
of the following remedies: (1) recovery of a judgment for specific performance
against Seller requiring Seller to purchase the Land; (2) recovery of the Agreed
Liquidated Damages (hereinafter defined) against Seller; and (3) termination of
any obligation of Purchaser to purchase the Property. Notwithstanding that
Purchaser is entitled to all of the foregoing remedies in the event of Seller's
default under Section 6.1(b) or (c), Purchaser may elect to seek or assert only
same, but not all, of such remedies.
6.3 Purchaser's Breach. Purchaser shall be considered to be in breach
hereunder upon the occurrence of any one or more of the following events:
(a) Any of Purchaser's warranties or representations set forth herein is
or becomes untrue in any material respect on or before the Project Closing Date;
(b) Purchaser fails to meet, comply with, or perform any covenant,
agreement, condition or obligation on its part required under this Agreement
other than as provided in Section 6.3(c) below; or
(c) Purchaser fails or refuses to purchase the Property on the Project
Closing Date or Purchaser notifies Seller at any time after the date of
execution hereof that Purchaser will not purchaser the Property for any reason
other than Seller's default.
6.4 Seller's Remedies. In the event Purchaser is in default pursuant to
Section 6.3(a) or (b) above and Seller has delivered to Purchaser written notice
of such breach and Purchaser has failed to cure such breach within 30 days after
such written notice, then a default shall be deemed to have occurred and Seller
may exercise such remedies as are available at law or in equity. In the event
Purchaser is in default pursuant to Section 6.3(c) above, then Seller shall be
entitled, as its sole and exclusive remedy, to either (1) recover a judgment for
specific performance against Purchaser to require Purchaser to purchase the
Property in accordance with the terms of this Contract or (2) terminate this
Contract with respect to Purchaser's obligation to purchase the Property and
recover the Agreed Liquidated Damages from Purchaser.
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6.5 Attorneys' Fees. In the event either party hereto finds it necessary
to bring an action at law or other proceeding against the other party to enforce
any of the terms, covenants or conditions hereof or any instrument executed
pursuant to this Agreement, or by reason of any breach or default hereunder or
thereunder, the party prevailing in any such action or proceeding shall be paid
all costs and reasonable attorneys' fees by the other party, and in the event
any judgment is secured by such prevailing party all such cost and attorneys'
fees shall be included in any such judgment. The reasonableness of such costs
and attorneys' fees shall be determined by the court and not the jury.
6.6 Waiver. No delay in exercising any right or remedy shall constitute a
waiver thereof, and no waiver by Seller or Purchaser of the breach of any
covenant of this Agreement shall be construed as a waiver of any preceding or
succeeding breach of the same or any other covenant or condition of this
Agreement.
6.7 Liquidated Damages. Seller and Purchaser each agree that, in the
event of a default by Seller as set forth in Sections 6.1(b) or (c) or a default
by Purchaser as set forth in Section 6.3(c) the non-defaulting party will be
substantially damaged but that the actual amount and extent of such damages
would be difficult to fully measure and would not be susceptible to being
calculated with certainty. Accordingly, each party agrees that, in any such
event, a remedy for liquidated damages is appropriate. The term "Agreed
Liquidated Damages" shall mean three times the annual Fair Market Rental Value
(hereinafter defined) as determined at the time the default occurs in the
following manner:
Fair Market Rental Value shall mean the then prevailing annual market
rental (determined on a completely "net" lease basis) actually being
received by owners of buildings in the West Loop/Galleria area of Houston,
Texas (the "Market Area") for office lease space which is 83,000 rentable
square feet in size and comparable to the Property, taking into
consideration (i) the location, quality and condition of the comparison
buildings; (ii) the use, location, size and/or floor level(s) of the
Property, including view, elevator lobby exposure, etc.; and (iii)
excluding all allowances and abatements then being offered by building
owners for leasehold improvements and leasing inducements.
Whenever the Agreed Liquidated Damages must be determined, then the Fair
Market Rental Value shall be determined as follows:
1. Each of the Seller and Purchaser shall select a real estate
appraiser within fifteen (15) days after the occurrence of a default which
necessitates the determination of the Fair Market Rental Value. Each
appraiser must be an M.A.I., must have at least ten (10) years of
experience appraising commercial real estate, some of which must have been
in the Market Area, must not have accepted an appraisal engagement from
either Seller or Purchaser within the past five (5) years, and must agree
to complete the determination of Fair Market Rental Value on the basis set
forth herein (including consideration of all relevant economic factors) as
promptly as possible but in no event later than sixty (60) days after
accepting the assignment.
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2. If either party fails to designate a qualified appraiser within such
fifteen (15) day period, the Fair Market Rental Value shall be determined by the
appraiser designated by the other party. No determination of the Fair Market
Rental Value by any appraiser shall be disclosed to the other appraiser(s) until
all appraisers' reports have been completed, provided, however, that each party
shall have the right to submit data relevant to the determination of Fair Market
Rental Value to the appraisers for the purpose of making their determinations.
If the Fair Market Rental Value determined by the two appraisers differ by five
percent (5%), or less, from one another, the Fair Market Rental Value shall be
the average of the amounts determined by the appraisers. If the Fair Market
Rental Value determined by the two appraisers differ by more than such five
percent (5%) from one another, the two appraisers shall, within fifteen (15)
days after the later of such determinations, select a third appraiser who shall
have the same qualifications as set forth above and who shall agree to render
his decision within thirty (30) days after his appointment. Upon the completion
of the determination by the third appraiser, the Fair Market Rental Value shall
be the amounts which are determined by two of the three appraisers, if those two
determine identical amounts, and otherwise shall be the average of the values
determined by the two appraisers whose determinations are closest. Seller and
Purchaser shall each pay the costs of the appraiser selected by such party, and
if a third appraiser is used, each agrees to pay one half of the cost of such
third appraiser. The determination of the Fair Market Rental Value made in the
foregoing manner shall be binding upon the parties and not subject to challenge
or appeal.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 Notices. All notices, demands, requests, consents and approvals which
may, or are required to, be given by any party to any other party hereunder
shall be in writing and shall be deemed given upon receipt if delivered
personally or upon the earlier of receipt or forty-eight hours after deposit in
the United States mail if sent by registered or certified mail, return receipt
requested, postpaid to:
PURCHASER AT:
Suite 1010
1400 Post Oak Boulevard
Houston, Texas 77056
Attention: Steven L. Scheinthal, Esq.
Phone number: (713) 850-1010
Fax number: (713) 623-4702
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SELLER AT:
Suite 1010
1400 Post Oak Boulevard
Houston, Texas 77056
Attention: Mr. Tilman J. Fertitta
Phone number: (713) 850-1010
Fax number: (713) 623-4702
or to such other addresses as either party may from time to time designate in
writing and deliver in a like manner
7.2 Legal Fees. Purchaser and Seller shall each pay their own legal fees
incurred in connection with this transaction.
7.3 Counterparts. This Contract may be executed in any number of
counterparts, each of which shall be an original, but such counterparts together
shall constitute one and the same instrument.
7.4 Amendment, Waiver: Assignment. No modification, termination or
amendment of this Agreement may be made except by written agreement or as
otherwise may be provided in this Agreement. All the terms, provisions and
conditions of this Agreement shall inure to the benefit of and be enforceable by
Seller's or Purchaser's respective successors and permitted assigns. Neither
Seller nor Purchaser shall transfer or assign their respective rights or
obligations hereunder without the prior written consent of the other; however,
either party may assign its rights and duties hereunder to an entity which
controls, is controlled by or is under common control with the assigning party,
but the assigning party shall not be released from its liability hereunder by
virtue of such assignment.
7.5 Captions. The captions of this Agreement are for convenience and
reference only and in no way define, limit or describe the scope or intent of
this Agreement.
7.6 Brokers. Purchaser and Seller hereby represent and warrant to each
other that they have not dealt with any person, firm or corporation entitled to
any fee, commission or other compensation for arranging the transactions which
are the subject of this Agreement.
7.7 Joint Venture. Nothing contained in this Agreement shall, create any
partnership, joint venture or other arrangement between Purchaser and Seller.
No term or provision of this Agreement is intended to be, or shall be, for the
benefit of any person, firm organization or corporation not a party hereto, and
no such other person, firm, organization or corporation shall have any right or
cause of action hereunder.
7.8 Interest on Past-Due Obligations. Any amount due to either party
hereunder which is not paid when due shall bear interest from the date due until
paid at a rate equal to the lesser of (i) 9% per annum or (ii) the highest
lawful rate.
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7.9 Governing Law, Time. This Agreement and the rights of the parties
hereto shall be governed and construed in accordance with the laws of the State
of Texas. Time is of the essence of this Agreement.
7.10 Authority. The parties signing below represent and warrant that they
have the requisite authority to bind the entities on whose behalf they are
signing.
7.11 Force Majeure. Whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be responsible
for and there shall be excluded from the computation of any such period of time,
any delays due to strikes, riots, act of god, shortages of labor or materials,
inclement weather, war, governmental laws, regulations or restrictions or any
other causes of any kind whatsoever which are beyond the reasonable control of
such party ("FORCE MAJEURE DELAYS").
7.12 Definitions. The following terms shall have the meaning indicated
below:
"ACT" means the Uniform Condominium Act as adopted in Chapter 82 of the
Texas Code, as hereafter amended.
"AGREED LIQUIDATED DAMAGES" is defined in Section 6.7 of this Agreement.
"AGREEMENT" is defined in the first paragraph of this document.
"ASSIGNMENT OF WARRANTIES" is defined in Section 4.3(a)(iv) of this
Agreement.
"CHANGE ORDER" is defined in Section 3.5 of this Agreement.
"COMPLETION CERTIFICATE" is defined in Section 3.4(c) of this Agreement.
"CONSTRUCTION DOCUMENTS" is defined in Paragraph I.B.(4) of Exhibit "C".
"DECLARATION" is defined in Section 3.7 of this Agreement.
"DEED" is defined in Section 4.3(a) of this Agreement.
"DEFERRED CLOSING DATE" is defined in Recital D of this Agreement.
"EFFECTIVE DATE" is defined on Page 1 of this Agreement.
"FORCE MAJEURE DELAYS" is defined in Section 7.11 of this Agreement.
"LAND" is defined in Recital A of this Agreement.
"LAND PRICE" is defined in Section 1.2 of this Agreement.
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"PERMITTED EXCEPTIONS" is defined in Section 2.3 of this Agreement.
"PRELIMINARY PLANS" is defined in Section 3.2 of this Agreement.
"PRELIMINARY PLANS AND SPECIFICATIONS" is defined in Paragraph I.A.1. of
Exhibit "C" of this Agreement.
"PRIMARY CLOSING DATE" is defined in Recital D of this Agreement.
"PROJECT" is defined in Recital B of this Agreement.
"PROJECT ARCHITECT" means Kirksey & Associates.
"PROJECT CLOSING DATE" is defined in Section 4.3(a) of this Agreement.
"PROPERTY" is defined in Recital C of this Agreement.
"PROPERTY PURCHASE PRICE" is defined in Section 1.1 of this Agreement.
"PURCHASER" is defined on Page 1 of this Agreement.
"SCHEDULED COMPLETION DATE" is defined in Section 3.4(a) of this Agreement.
"SELLER" is defined on Page 1 of this Agreement.
"SURVEY" is defined in Section 2.2 of this Agreement.
"TITLE COMMITMENT" is defined in Section 2.1 of this Agreement.
"TITLE POLICY" is defined in Section 4.3 of this Agreement.
"TITLE COMPANY" is defined in Section 2.1 of this Agreement.
7.13 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described in this Agreement, the day of the act or
event after which the designated time period begins to run is not to be included
and the last day of the period so computed is to be included, unless the last
day is a Saturday, Sunday or legal holiday, in which event the period shall run
until the next day which is neither a Saturday, Sunday or legal holiday. The
last day of any period of time described herein shall be deemed to end at
11:59 p.m., Houston, Texas time.
7.14 Change By Mutual Agreement. Mention is made that Seller and
Purchaser have, from time to time, discussed the possibility of Purchaser's
leasing, rather than purchasing, the Property. In the event that Seller and
Purchaser mutually agree to do so, but without in any manner implying that
either party has a duty to agree to do so, this Contract may be revised to
provide that
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Purchaser will, on the Project Closing Date, lease, rather than purchase, the
Property on terms and conditions mutually acceptable to Seller and Purchaser.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PURCHASER:
LANDRY'S MANAGEMENT, L.P.
a Delaware limited partnership
By: LANDRY'S G.P., INC., a Delaware corporation
By: /s/ Paul S. West
----------------------------------------
Name: PAUL S. WEST
----------------------------------------
Title: CFO
----------------------------------------
SELLER:
610 LOOP VENTURE, LLC,
a Texas limited liability company
By: /s/ Tilman J. Fertitta
---------------------------------------------
Name: TILMAN J. FERTITTA
---------------------------------------------
Title: President
---------------------------------------------
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EXHIBIT 10.2
PERSONAL SERVICE AND EMPLOYMENT AGREEMENT
This Personal Service and Employment Agreement (the "Agreement") is made
and entered into effective as of January 1, 1998 (the "Execution Date"), by and
between LANDRY'S SEAFOOD RESTAURANTS, INC., a Delaware corporation (the
"Company") and TILMAN J. FERTITTA, an individual, ("Fertitta").
WHEREAS, the Company wishes to retain the services of Fertitta as Chief
Executive Officer and President of the Company and its subsidiaries, subject to
and in accordance with the terms and provisions of this Agreement; and
WHEREAS, Fertitta desires to be employed by the Company subject to and in
accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1 . Engagement. The Company hereby engages and retains Fertitta to
perform the "Duties" (as hereinafter set forth) and Fertitta hereby
accepts the engagement to perform the Duties upon the terms and
conditions set forth herein.
2. Term. Subject to the other terms and provisions of the Agreement, the
term of this Agreement, unless sooner terminated, shall begin on the
Execution Date and shall expire on December 31, 2002 (the "Initial
Term"). Upon the expiration of the Initial Term, this Agreement shall
be automatically extended for an additional period of five (5) years
unless written notice is received twelve (12) months prior to such
expiration from the party electing not to extend this Agreement. (As
used herein, the Initial Term and any extension is herein called the
"Term.")
3. Duties. During the Term, Fertitta shall serve as the Chief Executive
Officer and President of the Company or such other office as shall be
mutually agreed upon by Fertitta and the Company. Fertitta shall
perform such duties and responsibilities as may be prescribed from
time to time by the Board of Directors of the Company (the "Board").
Without limiting the foregoing, during the Term, Fertitta shall, in
accordance with this Agreement and the directions and policies from
time to time established by the Board:
(a) Devote a majority of his time, attention and energies to the
Company, and without the consent of the Board, shall not render
any services of a business nature to any other person, firm,
corporation, or organization.
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(b) Perform such services for the Company as shall be prescribed
from time to time by the Board provided that such services shall
not be inconsistent with the normal and customary duties of a
Chief Executive Officer and President of a company of similar
character;
(c) Use his best efforts to promote the interests and objectives of
the Company.
(d) Provide to the members of the Board, within a reasonable period
of time, in advance of the Board's consideration of each
particular matter within the scope of Fertitta's responsibility,
all information material to a decision of the Board in respect
to such matter;
(e) Supervise, administer and manage the day-to-day operations of
the Company, provided that the actions and decisions of Fertitta
shall be reviewable by the requisite action of the Board and
stockholders of the Company in accordance with the Certificate
of Incorporation, the Bylaws of the Company and applicable law;
(f) Be responsible for the development and execution of short and
long term plans and goals in all functional areas of the
Company; provided that the actions and decisions of Fertitta
shall be reviewable by requisite action of the Board and
stockholders of the Company in accordance with the Certificate
of Incorporation, the Bylaws of the Company and applicable law;
(g) Recommend to the Board staffing and personnel policies
appropriate to achieving the best interests and objectives of
the Company and be responsible for implementing such policies as
are approved by the Board;
(h) Oversee and supervise all officers, employees and consultants of
the Company to the end that the best interests and objectives of
the Company are diligently and efficiently served by them;
(i) Render, at all times, all of the services explicitly and
implicitly hereunder, including, without limitation, careful
preparation and submission to the Board of accurate and
reasonable facts, data, estimates, projections and
recommendations.
4. Compensation.
(a) For services rendered pursuant to this Agreement, the Company
shall pay to Fertitta a base salary (the "Base Salary")
calculated at a rate of $585,000.00 per annum, payable on a bi-
weekly basis. Such sums shall be reduced by applicable
withholding, FICA, and other necessary pay-related taxes. The
Company also agrees that the compensation committee of the Board
("Compensation Committee")
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shall review Fertitta's salary at least annually to determine if
any salary increase is appropriate in the discretionary and sole
judgment of the Compensation Committee. Any increase in the Base
Salary or other compensation granted by the Board shall in no way
limit or reduce any other obligation of the Company hereunder
and, once established at an increased specific rate, Fertitta's
Base Salary hereunder shall not thereafter be reduced. For
purposes of this Agreement, "Base Salary" shall mean Fertitta's
initial Base Salary or, if increased, the increased Base Salary.
(b) Fertitta shall be entitled to participate in and receive bonus
awards under any bonus program established by the Company for its
management or key personnel. In the absence of or in addition to
such a program, Fertitta shall be entitled to receive such bonus,
if any, as may be determined from time to time by the
Compensation Committee in its discretionary and sole judgment
based on merit and the Company's performance.
(c) As of the date hereof, and if requested by Fertitta, on each
third anniversary of this Agreement, for Fertitta's business and
private use, the Company shall provide Fertitta with a new
automobile suitable to Fertitta's position and a driver. In
addition, the Company shall either directly pay or reimburse
Fertitta for all costs of OPERATING and maintaining such
automobile, including insurance thereon. The cost, excluding
operating expenses, maintenance and insurance, of any automobile
provided by the Company shall not exceed $200,000.00.
(d) The Company shall provide an expense allowance to Fertitta in
an amount to be set by the Board. In addition, throughout the
term of this Agreement, the Company shall reimburse Fertitta for
all reasonable business expenses (including expenses of travel
and entertainment) incurred by Fertitta. The Company shall also
pay directly or reimburse Fertitta for membership or initiation
fees and monthly dues for clubs Fertitta deems necessary to carry
out the duties set forth herein. The Company shall also provide
Fertitta with the use of Company transportation for his personal
use, benefit and travel.
(e) Fertitta shall be entitled to group life insurance, accidental
death and dismemberment insurance, hospitalization, surgical,
major medical coverage, long-term disability, and such other
insurance coverage at least equal to, or, if approved by the
Compensation Committee, greater than that which may be made
available to other executive officers of the Company. Provided,
however, Fertitta shall only be entitled to such insurance
coverage to the extent that such general claim of coverage is
provided to any other executive officer of the Company. The
Company shall pay directly or reimburse Fertitta for
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100% of any medical expense or charge not otherwise paid for by
the Company provided insurances, including deductibles or any
other charges. The Company shall also provide for the personal
security of Fertitta at all times.
(f) During the Term of this Agreement, Fertitta shall be entitled to
thirty (30) paid vacation days per year, or such additional
numbers as may be determined by the Board from time to time. For
purpose of this paragraph, weekends shall not count as vacation
days, and Fertitta shall also be entitled to all paid holidays
given by the Company to its other executive officers. The time or
times at which Fertitta will be permitted to take such vacation
time shall be determined by the mutual agreement of the Company
and Fertitta.
(g) The Company shall provide Fertitta, at the Company's expense,
with $70,000,000 of split-dollar life insurance and/or last-to-
die life insurance or any combination thereof (the "Policy") on
the life of Fertitta naming such beneficiaries thereunder as
Fertitta shall designate. The Policy shall be owned by Fertitta
or his designee.
(h) Each year of this Agreement, the Company shall make matching
charitable contributions to a charity or charities of Fertitta's
choice in the same amount made by Fertitta to the charity or
charities not to exceed a total amount of $250,000 in any one
year.
(i) During the Initial Term of this Agreement, Fertitta shall be
granted stock options in an amount no less than what Fertitta
received in stock options granted for the three (3) fiscal years
prior to 1998 (the "Minimum Number") at a price equal to the
fair market value of the common stock at the time of the grant
or grants. The date of grant or grants shall be in the sole
discretion of the Stock Option Committee, provided, however,
that at least fifty percent of the Minimum Number of options
granted hereunder shall be granted prior to December 31, 1999.
Fertitta shall have the right to exercise the stock options for
a term of ten (10) years. The stock options shall vest over
three (3) years from the date of grant or grants in equal annual
installments. Notwithstanding anything set forth herein or in
any stock option agreement, in the event the stock price
appreciates in value more than forty (40%) percent from the
grant price, all stock options at such price, shall become
immediately vested. All shares issuable to Fertitta upon
exercise of the options shall be registered pursuant to
applicable federal securities laws.
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5. Termination.
(a) Definitions.
(1) "Cause" shall mean:
(i) Dishonesty which is not the result of an inadvertent
or innocent mistake of Fertitta with respect to the
Company or any of its subsidiaries;
(ii) Willful misfeasance or nonfeasance of duty by
Fertitta intended to injure or having the effect of
injuring in some material fashion the reputation,
business, or business relationships of the Company
or any of its subsidiaries or any of their
respective officers, directors, or employees;
(iii) Material violation by Fertitta of any term of this
Agreement if such violation is not remedied or
reasonable steps to effect such remedy are not
commenced within thirty (30) days after written
notice of such violation and diligently pursued to
completion;
(iv) Conviction of Fertitta of any felony, any crime
involving moral turpitude or any crime other than a
vehicular offense which could reflect in some
material fashion unfavorably upon the Company or any
of its subsidiaries.
(2) A "Change of Control" shall be deemed to have occurred if:
(i) Any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) other than a trustee or other
fiduciary holding securities under an employee
benefit plan of the Company becomes the "beneficial
owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or
indirectly, of 50% or more of the Company's then
outstanding voting common stock; or
(ii) At any time during any consecutive thirty-six (36)
month period (not including any period prior to the
date hereof), individuals who at the beginning of
such period constituted the Board (and any new
director whose election by the Board or whose
nomination for election by the Company's
shareholders were approved by a vote of at least
two-thirds of the
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directors then still in office who either were
directors at the beginning of such period or whose
election or nomination for election was previously
so approved) cease for any reason to constitute a
majority thereof; or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than merger or consolidation (a)
in which a majority of the directors of the
surviving entity were directors of the Company prior
to such consolidation or merger, and (b) which would
result in the voting securities of the company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being changed into voting securities of the
surviving entity) more than 50% of the combined
voting power of the voting securities of the
surviving entity outstanding immediately after such
merger or consolidation; or
(iv) The stockholders approve a plan of complete
liquidation of the Company or an agreement for the
sale or disposition by the Company of all or
substantially all of the Company's assets.
(3) A "Disability" shall mean the absence of Fertitta from his
duties with the Company on a full-time basis for 180
consecutive days, or 180 days in a 365-day period, as a
result of incapacity due to mental or physical illness
which results in Fertitta being able to perform the
essential functions of his position, with or without
reasonable accommodation.
(4) A "Good Reason" shall mean any of the following (without
Fertitta's express written consent):
(i) A substantial and material alteration in the nature
or status of Fertitta's responsibilities, or the
assignment of duties inconsistent with, or a
substantial and material alteration in the nature or
status of, Fertitta's duties and responsibilities;
(ii) A failure by the Company to continue in effect any
employee benefit plan in which Fertitta was
participating, or the taking of any action by the
Company that would adversely affect Fertitta's
participation in, or materially reduce Fertitta's
benefits under, any such employee benefit plan,
unless such failure or such taking of any action
adversely affects
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the senior members of corporate management of the
Company generally;
(iii) A relocation of the Company's principal offices, or
Fertitta's relocation to any place other than the
principal offices, exceeding a distance of twenty
(20) miles from the Company's current corporate
office located in Houston, Texas, except for
reasonably required travel by Fertitta on the
Company's business;
(iv) Any material breach by the Company of any provision
of this Agreement if such material breach has not
been cured within thirty (30) days following written
notice of such breach by Fertitta to the Company
setting forth with reasonable specificity the nature
of the breach; or
(v) Any failure by the Company to obtain the assumption
and performance of this Agreement by any successor
(by merger, consolidation, or otherwise) or assign
of the Company.
(5) "Termination Date" shall mean the date Fertitta is
terminated for any reason pursuant to this Agreement.
(6) "Termination Following a Change of Control" shall mean: (i)
a Termination of Fertitta without Cause by the Company in
connection with or within one (1) year following a Change
of Control; (ii) a termination of Fertitta's employment
with the Company by Fertitta for Good Reason within one (1)
year following a Change of Control; (iii) failure of any
successor/surviving company to adopt this Agreement; or
(iv) a termination of Fertitta's employment with the
Company by Fertitta for any reason within one (1) year
following a Change of Control.
(b) Termination Without Cause, Termination Following a Change of
Control, or For Good Reason: Benefits. In the event there is a
termination without Cause, a Termination Following a Change of
Control, or if Fertitta terminates for Good Reason (a
"Termination Event"), this Agreement shall terminate and
Fertitta shall be entitled to the following severance benefits:
(1) Two (2) years of Base Salary at the rate in effect
immediately prior to the Termination Event, payable in full
within five (5) days of the Termination Event. Moreover,
the Company shall remain obligated to maintain, provide,
and keep all benefits set forth in paragraph 4(e) available
to Fertitta at the Company's expense for a period of two
(2) years after the
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<PAGE>
Termination Date. Moreover, Fertitta shall receive at no
additional cost, the automobile and the certificate of
title to the automobile referenced in paragraph 4(c) free
from any lien, claim, or encumbrance.
(2) Any stock options which Fertitta has received shall vest
immediately, and any options required to be granted
pursuant to Paragraph 4(i) which have not been so granted,
shall be granted and shall vest immediately and if there is
a Change in Control the grant price shall be the lowest
price of the Company's common stock during the 365 days
prior to the announcement of such Change in Control.
(3) To the extent not theretofore paid or provided, the Company
shall pay two million dollars ($2,000,000) to Fertitta in
lieu of any additional payments for the split dollar
insurance within five (5) days of the Termination Date and
shall pay or provide all other benefits which Fertitta is
eligible to receive as if he were still employed by the
Company for a period of two (2) years after the Termination
Date;
(4) If Fertitta receives any payments hereunder which are
subject to an excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any similar
tax imposed under federal, state, or local law
(collectively, "Excise Taxes"), the Company shall pay
Fertitta (on or before the date which Fertitta is required
to pay such Excise Taxes), 1) an additional amount equal to
all Excise Taxes then due and payable, and 2) the amount
necessary to defray Fertitta's increased (federal, state,
and local) income tax liability arising due to such
payments and any costs and expenses, including penalties
and interest incurred by Fertitta in connection with any
audit, proceedings, etc. related to the payment of such
Excise Taxes. For purposes of calculating the amount
payable to Fertitta under this Paragraph, the federal and
state income tax rates used shall be the highest marginal
federal and state rates applicable to ordinary income in
Fertitta's state of residence, taking into account any
federal income tax deductions or credits available to
Fertitta for state income taxes. The Company shall cause
its independent auditors to calculate such amount and
provide Fertitta a copy of such calculation at least ten
(10) days prior to the date specified above for payment of
such amount;
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(5) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to
Fertitta in a lump sum in cash within five (5) days after
the Termination Date along with the certificate of title
referenced in paragraph 5(b)(1) above.
(6) Fertitta, in addition to all other amounts, payments or
benefits provided hereunder, and in further consideration
of Fertitta's agreement under Section 8 below, shall
receive a lump sum payment in the amount of three million
dollars ($3,000,000), to be paid within five (5) days
following such Termination.
(7) Fertitta shall be free to accept other employment during
such period, and there shall be no offset of any employment
compensation earned by Fertitta in such other employment
during such period against payments due to Fertitta
hereunder, and there shall be no offset of any compensation
received from such other employment against the Base Salary
set forth above; provided, however, that such compensation
may terminate if acceptance of such employment would
violate any of the provisions of Section 8 below.
(c) Termination In Event of Death or Disability: Benefits. If
Fertitta's employment is terminated by reason of Fertitta's
death or Disability during the term of this Agreement (the
"Employment Period"), this Agreement shall terminate without
further obligation to Fertitta's legal representatives under
this Agreement, other than for payment of all compensation,
otherwise due to Fertitta during the Term hereof as if Fertitta
had not died or become disabled, unreimbursed expenses and the
timely payment or provision of Other Benefits through the date
of death or Disability. Such amounts shall be paid to Fertitta
or Fertitta's estate or beneficiary, as applicable, in a lump
sum cash payment within ninety (90) days after the date of death
or Disability. With respect to the provision of Other Benefits,
the term Other Benefits as used in this Paragraph 5(c) shall
include, without limitation, 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 such plans, programs, practices, and policies relating to
death or Disability benefits, if any, as in effect with respect
to other executives and their beneficiaries at any time during
the 120-day period immediately preceding the date of death or
Disability. Additionally, all stock options for which Fertitta
would have been eligible had he completed the term of this
Agreement, shall be granted and vest immediately, and Fertitta
or Fertitta's estate or beneficiary shall be vested in all other
options held by Fertitta as of the date of Fertitta's
termination.
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<PAGE>
(d) Voluntary Termination by Employee and Termination for Cause:
Benefits. Fertitta may terminate his employment with the
Company by giving written notice of his intent and stating an
effective Termination Date at least ninety (90) days after the
date of such notice; provided, however, that the Company may
accelerate such effective date by paying Fertitta through the
proposed Termination Date. The Company may terminate Fertitta's
employment for Cause at any time upon thirty (30) days prior
written notice. In the event Fertitta is terminated for Cause,
Fertitta may request a review of such decision by the entire
Board at the next regularly scheduled Board meeting. Upon such
termination by Fertitta or upon termination for Cause by the
Company, this Agreement shall terminate and the Company shall
pay to Fertitta all accrued compensation, unreimbursed expenses
and the Other Benefits through the Termination Date. Such
amounts shall be paid to Fertitta in a lump sum in cash within
thirty (30) days after the later of the date of termination or
the date of the Board's decision as set forth herein.
6. Indemnification: Liability Insurance. The Company shall indemnify and
hold Fertitta (or his legal representative) harmless to the full
extent permitted by applicable law for all legal expenses and all
liabilities, losses, judgments, fines, expenses, and amounts paid in
settlement in connection with any proceeding involving him (including
any action by or in the right of the Company) by reason of his being
or having been a director, officer, employee, consultant or agent of
the Company or any of its subsidiaries, affiliates, or any other
enterprise if he is serving or has served at the request of the
Company. In addition, the Company shall cause any such subsidiary,
affiliate, or enterprise also to so indemnify and hold Fertitta
harmless to the full extent permitted by applicable law. The
foregoing shall not be deemed to limit any rights of Fertitta
pursuant to applicable indemnification provisions of the Company's
Certificate of Incorporation or Bylaws or otherwise. In addition, the
Company shall acquire and maintain with reputable insurance companies
or associations acceptable to Fertitta, directors' and officers'
liability insurance for the benefit of Fertitta providing terms and
coverage amounts at least as favorable as those provided to other
officers or directors of the Company. Such insurance shall remain in
place (to the extent that the Company is able to purchase the same
for any officer or director) as long as necessary under applicable
statutes of limitations to cover all events occurring during the Term
of this Agreement regardless of when the claim is made.
7. Advance of Expenses. In the event of any action, proceeding or claim
against Fertitta arising out of his serving or having served in a
capacity specified in paragraph 6 above, the Company shall provide
Fertitta with counsel, who may be counsel for the Company as well, as
long as no conflict of interest exists between the Company and
Fertitta, and no ethical or professional responsibility rules prevent
the same counsel from representing both Fertitta and the Company. In
the event of any such conflict of interest or other bar to Fertitta
being represented by counsel for
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<PAGE>
the Company, Fertitta may retain his own separate counsel (such
choice of counsel may be made in his sole and absolute discretion),
and the Company shall be obligated to advance to Fertitta (or pay
directly to his counsel) reasonable counsel fees and other costs
associated with Fertitta's defense of such action, proceeding or
claim; provided, however, that in such event, Fertitta shall first
agree in writing, without posting bond or collateral, to repay all
sums paid or advanced to him pursuant to this provision in the event
that the final disposition of such action, proceeding or claim is one
for which Fertitta would not be entitled to indemnification pursuant
to the provisions hereof.
8. Non-Competition. Fertitta and the Company expressly agree that during
the Term and for a period of one (1) year immediately following the
termination of Fertitta's employment with the Company for any reason,
Fertitta will not, for himself, or on behalf of any other person,
persons, firm, partnership, company, corporation or organization,
engage, directly or indirectly, in any business involving the
operation or management of seafood restaurants, either as a
principal, partner, agent, employee, director, officer or in any
other capacity, within a one hundred (100) mile radius of any
location in which the Company operates a seafood restaurant.
9. No Mitigation Required. Fertitta's rights hereunder upon termination
of employment shall be cumulative with and in addition to any other
rights or remedies he may be entitled to by reason of any such
termination. In addition, Fertitta shall have no obligation to
mitigate his damages hereunder, whether by seeking new employment or
otherwise, nor shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by Fertitta as the
result of employment by another employer after the date of
termination of Fertitta's employment with the Company, or otherwise.
10. Nondisclosure. Except as otherwise required by law or court order,
Fertitta, at any time during the Term, shall not disclose or use,
except in the course of Fertitta's employment with the Company in the
pursuit of the business of the Company or any of its subsidiaries or
affiliates, any confidential information or nonpublic proprietary
data of the Company or any of its subsidiaries or affiliates, whether
such information or proprietary data is in Fertitta's memory or
embodied in writing or other physical form.
11. Representations and Warranties. The Company represents and warrants
that the execution of this Agreement by the Company has been duly
authorized by resolution of the Board.
12. Entire Agreement. This Agreement constitutes the entire understanding
between Company and Fertitta relating to Fertitta's employment
hereunder and supersedes and cancels all prior written and oral
understandings and agreements with respect to such matters.
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<PAGE>
13. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon its
successors and assigns. The right and obligations of Fertitta under
this Agreement are of a personal nature and shall neither be assigned
nor transferred in whole or in part by Fertitta.
14. Arbitration. In the event any dispute arises out of Fertitta's
employment with Company, or separation therefrom, which cannot be
resolved by the parties to this Agreement, such dispute shall be
submitted to final and binding arbitration. The arbitration shall be
conducted in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association ("AAA").
If the parties cannot agree on an arbitrator, a list of seven (7)
arbitrators will be requested from AAA, and the arbitrator will be
selected using alternate strikes with Fertitta striking first. The
cost of the arbitration will be shared equally by Fertitta and
Company. Arbitration of such disputes is mandatory and in lieu of any
and all civil causes of action and lawsuits either party may have
against the other arising out of the Fertitta's employment with
Company, or separation therefrom. Such arbitration shall be held in
Houston, Texas.
15. Miscellaneous.
(a) This Agreement shall be subject to and governed by the laws of
the state of Texas and venue shall lie in the courts of Harris
County.
(b) Failure by either party to insist upon strict compliance with
any provision hereof shall not be deemed a waiver of such
provision or any other provision hereof.
(c) This Agreement may not be modified except by an agreement in
writing executed by the parties hereto.
(d) No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or any breach
hereof, shall be deemed a waiver of such right in the future of
any other right or remedy available under this Agreement.
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<PAGE>
(e) The invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any other
provision.
(f) The section and paragraph headings contained in this Agreement
are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first set out above.
LANDRY'S SEAFOOD RESTAURANTS, INC.
By: /s/ Joe Max Taylor
-------------------------------------------
Joe Max Taylor
Chairman Compensation Committee
Employee: /s/ Tilman J. Fertitta
-------------------------------------
Tilman J. Fertitta
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PERSONAL SERVICE AND EMPLOYMENT AGREEMENT
This Personal Service and Employment Agreement (the "Agreement") is made
and entered into effective as of January 1, 1998 (the "Execution Date"), by and
between LANDRY'S SEAFOOD RESTAURANTS, INC., a Delaware corporation (the
"Company") and Steven L. Scheinthal an individual ("Executive").
WHEREAS, the Company wishes to retain the services of Executive as Vice
President of Administration, General Counsel, and Corporate Secretary of the
Company, subject to and in accordance with the terms and provisions of this
Agreement; and
WHEREAS, Executive desires to be employed by the Company subject to and in
accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Engagement. The Company hereby engages and retains Executive to
perform the "Duties" (as hereinafter set forth) and Executive hereby
accepts the engagement to perform the Duties upon the terms and
conditions set forth herein.
2. Term. Subject to the other terms and provisions of the Agreement, the
term of this Agreement, unless sooner terminated, shall begin on the
Execution Date and shall expire on December 31, 2002 (the "Term").
3. Duties. During the Term, Executive shall serve as the Vice President
of Administration, General Counsel, and Corporate Secretary of the
Company or such other office as shall be mutually agreed upon by
Executive and the Company. Executive shall perform such duties and
responsibilities as may be prescribed from time to time by the Board
of Directors of the Company (the "Board") or the Company's Chief
Executive Officer ("Chief Executive"). At the request of the Chief
Executive, Executive shall be nominated to serve on the Board of
Directors of the Company. At the Chief Executive's request, Executive
shall serve as an officer and/or on the Board of Directors of one or
more of the Company's subsidiaries. Without limiting the foregoing,
during the Term, Executive shall, in accordance with this Agreement
and the directions and policies from time to time established by the
Board and Chief Executive:
(a) Devote his full time, attention and energies to the Company, and
without the consent of the Board and Chief Executive, shall not
render any services of a business nature to any other person,
firm, corporation, or organization.
(b) Perform such services for the Company as shall be prescribed
from time to time by the Board and Chief Executive provided that
such services shall not be inconsistent with the normal and
customary duties of a company of similar character;
<PAGE>
(c) Use his best efforts to promote the interests and objectives of
the Company.
4. Stock Ownership. So long as Executive is employed by the Company or
serves on its Board of Directors, Executive shall maintain ownership
of no less than the greater of 12,500 shares of common stock in the
Company or twenty percent (20%) of Executive's total grant of vested
options for the current calendar year.
5. Compensation.
(a) For services rendered pursuant to this Agreement, the Company
shall pay to Executive a base salary (the "Base Salary")
calculated at a rate of $185,000 per annum, payable on a bi-
weekly basis. Such sums shall be reduced by applicable
withholding, FICA, and other necessary pay-related taxes. The
Company also agrees that the compensation committee of the Board
("Compensation Committee") shall review Executive's salary at
least annually to determine if any salary increase is
appropriate in the discretionary and sole judgment of the
Compensation Committee. Any increase in the Base Salary or other
compensation granted by the Board shall in no way limit or
reduce any other obligation of the Company hereunder and, once
established at an increased specific rate, Executive's Base
Salary hereunder shall not thereafter be reduced. For purposes
of this Agreement, "Base Salary" shall mean Executive's initial
Base Salary or, if increased, the increased Base Salary.
(b) Executive shall be entitled to participate in and receive bonus
awards under any bonus program established by the Company for
its management or key personnel. In the absence of or in
addition to such a program, Executive shall be entitled to
receive such bonus, if any, as may be determined from time to
time by the Compensation Committee in its discretionary and sole
judgment based on merit and the Company's performance.
(c) As of the date hereof, the Company shall provide Executive
with a new automobile suitable to Executive's position with the
Company. In addition, the Company shall either directly pay or
reimburse Executive for all costs of operating and maintaining
such automobile, including insurance thereon.
(d) The Company shall provide an expense allowance to Executive in
an amount to be set by the Board. In addition, throughout the
term of this Agreement, the Company shall reimburse Executive
for all reasonable business expenses (including expenses of
travel and entertainment) incurred by Executive. The Company
shall also pay directly or reimburse Executive for membership or
initiation fees and reasonable monthly dues (excluding
miscellaneous charges) for
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clubs located in the Greater Houston area that Executive deems
necessary to carry out the duties set forth herein. The
Company's obligation to pay for initiation fees shall not
exceed $10,000 during the Term. At least once a year during the
Term, and subject to availability as determined by the
Company's Chief Executive, the Company shall also provide
Executive with the use of Company transportation for his
personal use, benefit, and travel to and from a single
destination located within the continental United States.
(e) Executive shall be entitled to group life insurance, accidental
death and dismemberment insurance, hospitalization, surgical,
major medical coverage, long-term disability, and such other
insurance coverage that is made available to other executive
officers of the Company excluding the Chief Executive.
Provided, however, Executive shall only be entitled to such
insurance coverage to the extent that such coverage is provided
to all other executive officers of the Company excluding the
Chief Executive. The Company shall pay directly or reimburse
Executive for any medical expenses or charges not otherwise
paid for by the Company provided insurances, including
deductibles or any other charges, not to exceed $3,000 during
each year of the Term.
(f) During the Term of this Agreement, Executive shall be entitled
to twenty (20) paid vacation days per year, or such additional
numbers as may be determined by the Board from time to time.
For purpose of this paragraph, weekends shall not count as
vacation days, and Executive shall also be entitled to all paid
holidays given by the Company to its other executive officers.
The time or times at which Executive will be permitted to take
such vacation time shall be determined by the mutual agreement
of the Chief Executive and Executive.
(g) The Company shall provide Executive with $5,000,000 of split-
dollar variable life insurance (the "Policy") on the life of
Executive naming such beneficiaries thereunder as Executive
shall designate. The Policy shall be owned by Executive or his
designee.
(h) Each year of this Agreement, the Company shall make matching
charitable contributions to a charity or charities of
Executive's choice in the same amount made by Executive to the
charity or charities not to exceed a total amount of $15,000 in
any one year.
(i) During the Term of this Agreement, Executive shall be granted
no less than 200,000 stock options (the "Minimum Number") at a
price equal to the fair market value of the common stock at the
time of the grant or grants. The date of grant or grants shall
be in the sole discretion of the Stock Option Committee,
provided, however, that at least fifty percent of the Minimum
Number of options granted
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<PAGE>
hereunder shall be granted prior to December 31, 1999.
Executive shall have the right to exercise the stock options
for a term of ten (10) years. The stock options shall vest over
three (3) years from the respective dates of grant in equal
annual installments. All shares issuable to Executive upon
exercise of the options shall be registered pursuant to
applicable federal securities laws.
6. Termination.
(a) Definitions.
(1) "Cause" shall mean:
(i) Dishonesty which is not the result of an
inadvertent or innocent mistake of Executive with
respect to the Company or any of its subsidiaries;
(ii) Insubordination;
(iii) Willful misfeasance of duty by Executive intended
to injure or having the effect of injuring in some
material fashion the reputation, business, or
business relationships of the Company or any of its
subsidiaries or any of their respective officers,
directors, or employees;
(iv) Material violation by Executive of any term of this
Agreement;
(v) Conviction of Executive of any felony, any crime
involving moral turpitude or any crime other than a
vehicular offense which could reflect in some
material fashion unfavorably upon the Company or
any of its subsidiaries; and
(vi) Failure of Executive to perform the Duties required
hereunder.
(2) A "Change of Control" shall be deemed to have occurred if:
(i) Any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) other than a trustee or other
fiduciary holding securities under an employee
benefit plan of the Company becomes the "beneficial
owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or
indirectly, of 50% or more of
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<PAGE>
the Company's then outstanding voting common stock;
or
(ii) At any time during any consecutive thirty-six (36)
month period (not including any period prior to the
date hereof), individuals who at the beginning of
such period constituted the Board (and any new
director whose election by the Board or whose
nomination for election by the Company's
stockholders were approved by a vote of at least
two-thirds of the directors then still in office
who either were directors at the beginning of such
period or whose election or nomination for election
was previously so approved) cease for any reason to
constitute a majority thereof; or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than merger or consolidation (a)
in which a majority of the directors of the
surviving entity were directors of the Company
prior to such consolidation or merger, or (b) which
would result in the voting securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being changed into voting
securities of the surviving entity) more than 50%
of the combined voting power of the voting
securities of the surviving entity outstanding
immediately after such merger or consolidation; or
(iv) The stockholders approve a plan of complete
liquidation of the Company or an agreement for the
sale or disposition by the Company of all or
substantially all of the Company's assets.
(3) A "Disability" shall mean the absence of Executive from
his duties with the Company on a full-time basis for 180
consecutive days, or 180 days in a 365-day period, as a
result of incapacity due to mental or physical illness
which results in Executive being able to perform the
essential functions of his position, with or without
reasonable accommodation.
(4) "Termination Date" shall mean the date Executive is
terminated for any reason pursuant to this Agreement.
(5) "Termination Following a Change of Control" shall mean:
(i) a Termination of Executive without Cause by the
Company in connection with or within one (1) year
following a Change of
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<PAGE>
Control; (ii) failure of any successor/surviving company
to adopt this Agreement; or (iii) a termination of
Executive's employment with the Company by Executive for
any reason within one (1) year following a Change of
Control.
(b) Termination Following a Change of Control. In the event there
is a Termination Following a Change of Control, this Agreement
shall terminate and Executive shall be entitled to the
following severance benefits:
(1) For a period of twelve (12) months after the Termination
Date (the "Compensation Period"), Base Salary at the rate
in effect immediately prior to the Termination Event,
payable monthly, in arrears. in addition, the Company
shall remain obligated to maintain and keep all benefits
set forth in paragraphs 5(e) and (g) available to
Executive at the Company's expense for a period of one (1)
year after the Termination Date. Moreover, Executive shall
receive at no additional cost, the automobile and
certificate of title to the automobile referenced in
paragraph 5(c) free of any lien, claim, or encumbrance.
(2) Any stock options which Executive has received shall vest
immediately, and all options required to be granted
pursuant to Paragraph 5(i) which have not been so granted,
shall be granted and shall vest immediately and the grant
price shall be the lowest price of the Company's common
stock during the 120 days prior to the announcement of
such Change in Control.
(3) If Executive receives any payments hereunder which are
subject to an excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any similar
tax imposed under federal, state, or local law
(collectively, "Excise Taxes"), the Company shall pay
Executive (on or before the date which Executive is
required to pay such Excise Taxes), 1) an additional
amount equal to all Excise Taxes then due and payable, and
2) the amount necessary to defray Executive's increased
(federal, state, and local) income tax liability arising
due to such payments and any costs and expenses, including
penalties and interest incurred by Executive in connection
with any audit, proceedings, etc. related to the payment
of such Excise Taxes. For purposes of calculating the
amount payable to Executive under this Paragraph, the
federal and state income tax rates used shall be the
highest marginal federal and state rates applicable to
ordinary income in Executive's state of residence, taking
into account any federal income tax deductions or credits
available to Executive for state income taxes. The Company
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shall cause its independent auditors to calculate such
amount and provide Executive a copy of such calculation at
least ten (10) days prior to the date specified above for
payment of such amount.
(4) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to
Executive in a lump sum in cash within thirty (30) days
after the Termination Date along with the certificate of
title referenced in paragraph 6(b)(1) above.
(5) Executive, in addition to all other amounts, payments or
benefits provided hereunder, and in consideration of
Executive's agreement under Section 9 below, shall receive
a lump sum payment in the amount of one million five
hundred thousand dollars ($1,500,000), to be paid within
five (5) days following such Termination.
(6) Executive shall be free to accept other employment during
the Compensation Period, and there shall be no offset of
any employment compensation earned by Executive in such
other employment during the Compensation Period against
payments due to Executive hereunder, and there shall be no
offset of any compensation received from such other
employment against the Base Salary set forth above;
provided, however, that such compensation may terminate if
Executive violate any of the provisions of Section 9
below.
(c) Termination In Event of Death or Disability: Benefits. If
Executive's employment is terminated by reason of Executive's
death or Disability during the term of this Agreement (the
"Employment Period"), this Agreement shall terminate without
further obligation to Executive's legal representatives under
this Agreement, other than for payment of all compensation
under Section 5(a) otherwise due to Executive during the Term
hereof as if Executive had not died or become disabled and,
unreimbursed expenses and the timely payment or provision of
Other Benefits through the date of death or Disability. The
Section 5(a) compensation shall be payable monthly in arrears
at the Base Salary of Executive in effect immediately preceding
Executive's death or Disability. Such other amounts shall be
paid to Executive or Executive's estate or beneficiary, as
applicable, in a lump sum cash payment within ninety (90) days
after the date of death or Disability. With respect to the
provision of Other Benefits, the term Other Benefits as used in
this Paragraph 6(c) shall mean 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 such plans, programs, practices, and policies
relating to death or Disability benefits, if any,
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as in effect with respect to other executives and their
beneficiaries at any time during the 120-day period immediately
preceding the date of death or Disability. Additionally, all
stock options for which Executive would have been eligible had
he completed the Term of this Agreement, shall be granted and
vest immediately, and Executive or Executive's estate or
beneficiary shall be vested in all other options held by
Executive as of the date of Executive's termination.
(d) Voluntary Termination by Employee and Termination :For Cause:
Benefits. Executive may terminate his employment with the
Company by giving written notice of his intent and stating an
effective Termination Date at least ninety (90) days after the
date of such notice; provided, however, that the Company may
accelerate such effective date by paying Executive through the
proposed Termination Date. The Company may terminate
Executive's employment for Cause at any time without prior
written notice. Upon such termination by Executive or upon
termination for Cause by the Company, this Agreement shall
terminate and the Company shall pay to Executive all accrued
compensation, and unreimbursed expenses through the Termination
Date. Such amounts shall be paid to Executive in a lump sum in
cash within thirty (30) days after the date of termination.
(e) Termination Without Cause. The Company may terminate
Executive's employment without Cause at any time without prior
notice. In the event there is a termination without Cause, this
Agreement shall terminate and Executive shall only be entitled
to the following severance benefits:
(1) For a period of twelve (12) months after the Termination
Date (the "Compensation Period"), Base Salary at the rate
in effect immediately prior to the Termination Date,
payable monthly, in arrears. In addition, the Company
shall remain obligated to maintain and keep all benefits
set forth in paragraphs 5(e) and (g) available to
Executive at the Company's expense for a period of one (1)
year after the Termination Date.
(2) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to
Executive in a lump sum in cash within thirty (30) days
after the Termination Date; and
(3) Executive shall be free to accept other employment during
the Compensation Period, and there shall be no offset of
any employment compensation earned by Executive in such
other employment during the Compensation Period against
payments due to Executive hereunder, and there shall be no
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offset of any compensation received from such other
employment against the Base Salary set forth above;
provided, however, that such compensation may terminate if
Executive violates any of the provisions of Section 9
below.
(f) Termination as Officer or Director. Upon any termination of
Executive's employment, Executive shall be deemed as having
tendered his resignation as an Officer and a Director of the
Company and each of its subsidiaries or related companies.
7. Indemnification; Liability Insurance. The Company shall indemnify
and hold Executive (or his legal representative) harmless to the
full extent permitted by applicable law for all legal expenses and
all liabilities, losses, judgments, fines, expenses, and amounts
paid in settlement in connection with any proceeding involving him
(including any action by or in the right of the Company) by reason
of his being or having been a director, officer, employee,
consultant or agent of the Company or any of its subsidiaries,
affiliates, or any other enterprise if he is serving or has served
at the request of the Company. In addition, the Company shall cause
any such subsidiary, affiliate, or enterprise also to so indemnify
and hold Executive harmless to the full extent permitted by
applicable law. The foregoing shall not be deemed to limit any
rights of Executive pursuant to applicable indemnification
provisions of the Company's Certificate of Incorporation or Bylaws
or otherwise. In addition, the Company shall acquire and maintain
with reputable insurance companies or associations acceptable to
Executive, directors' and officers' liability insurance for the
benefit of Executive providing terms and coverage amounts at least
as favorable as those provided to other officers or directors of the
Company. Such insurance shall remain in place (to the extent that
the Company is able to purchase the same for any officer or
director) as long as necessary under applicable statutes of
limitations to cover all events occurring during the Term of this
Agreement regardless of when the claim is made.
8. Advance of Expenses. In the event of any action, proceeding or claim
against Executive arising out of his serving or having served in a
capacity specified in paragraph 6 above, the Company shall provide
Executive with counsel, who may be counsel for the Company as well,
as long as no conflict of interest exists between the Company and
Executive, and no ethical or professional responsibility rules
prevent the same counsel from representing both Executive and the
company. In the event of any such conflict of interest or other bar
to Executive being represented by counsel for the Company, Executive
may retain his own separate counsel (such choice of counsel may be
made in his sole and absolute discretion), and the Company shall be
obligated to advance to Executive (or pay directly to his counsel)
reasonable counsel fees and other costs associated with Executive's
defense of such action, proceeding or claim; provided, however, that
in such event, Executive shall first agree in writing, without
posting bond or collateral, to repay all sums paid or advanced to
him pursuant to this
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provision in the event that the final disposition of such action,
proceeding or claim is one for which Executive would not be entitled
to indemnification pursuant to the provisions hereof.
9. Non-Competition and Non-Solicitation.
(a) Executive and the Company expressly agree that during the Term
and for a period of one (1) year immediately following the
termination of Executive's employment with the Company for any
reason, Executive will not, for himself, or on behalf of any
other person, persons, firm, partnership, company, corporation
or organization, engage in, or provide services to, directly or
indirectly, any casual dining restaurant business either as a
principal, partner, agent, employee, director, officer,
independent contractor, consultant, or in any other capacity in
the United States of America.
(b) Employee agrees that during his period of employment with the
Company and for a period of two years after the termination of
employment (for any reason), Employee will not, directly or
indirectly, solicit, divert, or hire away or attempt to
solicit, divert, or hire away any person employed by the
Company, whether or not such person is a full-time or temporary
employee of the Company and will not make known to any person,
firm, entity, or corporation the names and addresses of any of
the employees of the Company or any information pertaining to
the employees of the Company.
10. No Mitigation Required. Executive's rights hereunder upon
termination of employment shall be cumulative with and in addition
to any other rights or remedies he may be entitled to by reason of
any such termination. In addition, Executive shall have no
obligation to mitigate his damages hereunder, whether by seeking new
employment or otherwise, nor shall the amount of any payment
provided for in this Agreement be reduced by any compensation earned
by Executive as the result of employment by another employer after
the date of termination of Executive's employment with the Company,
or otherwise.
11. Nondisclosure. Except as otherwise required by law or court order,
Executive, at any time during the Term, shall not disclose or use,
except in the course of Executive's employment with the Company in
the pursuit of the business of the Company or any of its
subsidiaries or affiliates, any confidential information or
nonpublic proprietary data of the Company or any of its subsidiaries
or affiliates, whether such information or proprietary data is in
Executive's memory or embodied in writing or other physical form.
Upon termination of employment with the Company for any reason
whatsoever, Executive shall forthwith deliver or cause to be
delivered to the Company any and all confidential information,
including drawings, notebooks, computers, keys, data, and other
documents and materials belonging to the Company which is in his
possession or under Executive's
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control relating to the Company or the business of the Company, and
will deliver to the Company upon such termination of employment any
other property of the Company which is in his possession or under
his control.
12. Representations and Warranties. The Company represents and warrants
that the execution of this Agreement by the Company has been duly
authorized by resolution of the Board.
13. Entire Agreement. This Agreement constitutes the entire
understanding between Company and Executive relating to Executive's
employment hereunder and supersedes and cancels all prior written
and oral understandings and agreements with respect to such matters.
14. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon
its successors and assigns. The right and obligations of Executive
under this Agreement are of a personal nature and shall neither be
assigned nor transferred in whole or in part by Executive.
15. Miscellaneous.
(a) This Agreement shall be subject to and governed by the laws of
the state of Texas and venue shall lie in the courts of Harris
County.
(b) Failure by either party to insist upon strict compliance with
any provision hereof shall not be deemed a waiver of such
provision or any other provision hereof.
(c) This Agreement may not be modified except by an agreement in
writing executed by the parties hereto.
(d) No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or any breach
hereof, shall be deemed a waiver of such right in the future of
any other right or remedy available under this Agreement.
(e) The invalidity or unenforceability of any provision hereof
shall not affect the validity or enforceability of any other
provision.
(f) The section and paragraph headings contained in this Agreement
are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first set out above.
LANDRY'S SEAFOOD RESTAURANTS, INC.
By: /s/ Tilman J. Fertitta
--------------------------------
Name: Tilman J. Fertitta
----------------------------
Title: President
---------------------------
Executive: /s/ Steven L. Scheinthal
-------------------------
Steven L. Scheinthal
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PERSONAL SERVICE AND EMPLOYMENT AGREEMENT
This Personal Service and Employment Agreement (the "Agreement") is made
and entered into effective as of January 1, 1998 (the "Execution Date"), by and
between LANDRY'S SEAFOOD RESTAURANTS, INC., a Delaware corporation (the
"Company") and Paul S. West an individual ("Executive").
WHEREAS, the Company wishes to retain the services of Executive as Chief
Financial Officer of the Company, subject to and in accordance with the terms
and provisions of this Agreement; and
WHEREAS, Executive desires to be employed by the Company subject to and in
accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1 . Engagement. The Company hereby engages and retains Executive to
perform the "Duties" (as hereinafter set forth) and Executive hereby
accepts the engagement to perform the Duties upon the terms and
conditions set forth herein.
2. Term. Subject to the other terms and provisions of the Agreement, the
term of this Agreement, unless sooner terminated, shall begin on the
Execution Date and shall expire on December 31, 2002 (the "Term").
3. Duties. During the Term, Executive shall serve as the Chief Financial
Officer of the Company or such other office as shall be mutually
agreed upon by Executive and the Company. Executive shall perform
such duties and responsibilities as may be prescribed from time to
time by the Board of Directors of the Company (the "Board") or the
Company's Chief Executive Officer ("Chief Executive"). At the request
of the Chief Executive, Executive shall be nominated to serve on the
Board of Directors of the Company. At the Chief Executive's request,
Executive shall serve as an officer and/or on the Board of Directors
of one or more of the Company's subsidiaries. Without limiting the
foregoing, during the Term, Executive shall, in accordance with this
Agreement and the directions and policies from time to time
established by the Board and Chief Executive:
(a) Devote his full time, attention and energies to the Company, and
without the consent of the Board and Chief Executive, shall not
render any services of a business nature to any other person,
firm, corporation, or organization.
(b) Perform such services for the Company as shall be prescribed
from time to time by the Board and Chief Executive provided that
such services shall not be inconsistent with the normal and
customary duties of a company of similar character;
<PAGE>
(c) Use his best efforts to promote the interests and objectives
of the Company.
4. Stock Ownership. So long as Executive is employed by the Company or
serves on its Board of Directors, Executive shall maintain ownership
of no less than the greater of 10,000 shares of common stock in the
Company or twenty percent (20%) of Executive's total grant of vested
options for the current calendar year.
5. Compensation.
(a) For services rendered pursuant to this Agreement, the Company
shall pay to Executive a base salary (the "Base Salary")
calculated at a rate of $180,000 per annum, payable on a bi-
weekly basis. Such sums shall be reduced by applicable
withholding, FICA, and other necessary pay-related taxes. The
Company also agrees that the compensation committee of the Board
("Compensation Committee") shall review Executive's salary at
least annually to determine if any salary increase is
appropriate in the discretionary and sole judgment of the
Compensation Committee. Any increase in the Base Salary or other
compensation granted by the Board shall in no way limit or
reduce any other obligation of the Company hereunder and, once
established at an increased specific rate, Executive's Base
Salary hereunder shall not thereafter be reduced. For purposes
of this Agreement, "Base Salary" shall mean Executive's initial
Base Salary or, if increased, the increased Base Salary.
(b) Executive shall be entitled to participate in and receive bonus
awards under any bonus program established by the Company for
its management or key personnel. In the absence of or in
addition to such a program, Executive shall be entitled to
receive such bonus, if any, as may be determined from time to
time by the Compensation Committee in its discretionary and sole
judgment based on merit and the Company's performance.
(c) As of the date hereof, the Company shall provide Executive with
a new automobile suitable to Executive's position with the
Company. In addition, the Company shall either directly pay or
reimburse Executive for all costs of operating and maintaining
such automobile, including insurance thereon.
(d) The Company shall provide an expense allowance to Executive in
an amount to be set by the Board. In addition, throughout the
term of this Agreement, the Company shall reimburse Executive
for all reasonable business expenses (including expenses of
travel and entertainment) incurred by Executive. The Company
shall also pay directly or reimburse Executive for membership or
initiation fees and reasonable monthly dues (excluding
miscellaneous charges) for
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clubs located in the Greater Houston area that Executive deems
necessary to carry out the duties set forth herein. The
Company's obligation to pay for initiation fees shall not exceed
$10,000 during the Term. At least once a year during the Term,
and subject to availability as determined by the Company's Chief
Executive, the Company shall also provide Executive with the use
of Company transportation for his personal use, benefit, and
travel to and from a single destination located within the
continental United States.
(e) Executive shall be entitled to group life insurance, accidental
death and dismemberment insurance, hospitalization, surgical,
major medical coverage, long-term disability, and such other
insurance coverage that is made available to other executive
officers of the Company excluding the Chief Executive. Provided,
however, Executive shall only be entitled to such insurance
coverage to the extent that such coverage is provided to all
other executive officers of the Company excluding the Chief
Executive. The Company shall pay directly or reimburse Executive
for any medical expenses or charges not otherwise paid for by
the Company provided insurances, including deductibles or any
other charges, not to exceed $3,000 during each year of the
Term.
(f) During the Term of this Agreement, Executive shall be entitled
to twenty (20) paid vacation days per year, or such additional
numbers as may be determined by the Board from time to time. For
purpose of this paragraph, weekends shall not count as vacation
days, and Executive shall also be entitled to all paid holidays
given by the Company to its other executive officers. The time
or times at which Executive will be permitted to take such
vacation time shall be determined by the mutual agreement of the
Chief Executive and Executive.
(g) The Company shall provide Executive with $5,000,000 of split-
dollar variable life insurance (the "Policy") on the life of
Executive naming such beneficiaries thereunder as Executive
shall designate. The Policy shall be owned by Executive or his
designee.
(h) Each year of this Agreement, the Company shall make matching
charitable contributions to a charity or charities of
Executive's choice in the same amount made by Executive to the
charity or charities not to exceed a total amount of $15,000 in
any one year.
(i) During the Term of this Agreement, Executive shall be granted no
less than 200,000 stock options (the "Minimum Number") at a
price equal to the fair market value of the common stock at the
time of the grant or grants. The date of grant or grants shall
be in the sole discretion of the Stock Option Committee,
provided, however, that at least fifty percent of the Minimum
Number of options granted
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hereunder shall be granted prior to December 31, 1999. Executive
shall have the right to exercise the stock options for a term of
ten (10) years. The stock options shall vest over three (3)
years from the respective dates of grant in equal annual
installments. All shares issuable to Executive upon exercise of
the options shall be registered pursuant to applicable federal
securities laws.
6. Termination.
(a) Definitions.
(1) "Cause" shall mean:
(i) Dishonesty which is not the result of an
inadvertent or innocent mistake of Executive with
respect to the Company or any of its subsidiaries;
(ii) Insubordination;
(iii) Willful misfeasance of duty by Executive intended to
injure or having the effect of injuring in some
material fashion the reputation, business, or
business relationships of the Company or any of its
subsidiaries or any of their respective officers,
directors, or employees;
(iv) Material violation by Executive of any term of this
Agreement;
(v) Conviction of Executive of any felony, any crime
involving moral turpitude or any crime other than a
vehicular offense which could reflect in some
material fashion unfavorably upon the Company or any
of its subsidiaries; and
(vi) Failure of Executive to perform the Duties required
hereunder.
(2) A "Change of Control" shall be deemed to have occurred if:
(i) Any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) other than a trustee or other
fiduciary holding securities under an employee
benefit plan of the Company becomes the "beneficial
owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or
indirectly, of 50% or more of
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the Company's then outstanding voting common stock;
or
(ii) At any time during any consecutive thirty-six (36)
month period (not including any period prior to the
date hereof), individuals who at the beginning of
such period constituted the Board (and any new
director whose election by the Board or whose
nomination for election by the Company's
stockholders were approved by a vote of at least
two-thirds of the directors then still in office who
either were directors at the beginning of such
period or whose election or nomination for election
was previously so approved) cease for any reason to
constitute a majority thereof; or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than merger or consolidation (a)
in which a majority of the directors of the
surviving entity were directors of the Company prior
to such consolidation or merger, or (b) which would
result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being changed into voting securities of the
surviving entity) more than 50% of the combined
voting power of the voting securities of the
surviving entity outstanding immediately after such
merger or consolidation; or
(iv) The stockholders approve a plan of complete
liquidation of the Company or an agreement for the
sale or disposition by the Company of all or
substantially all of the Company's assets.
(3) A "Disability" shall mean the absence of Executive from his
duties with the Company on a full-time basis for 180
consecutive days, or 180 days in a 365-day period, as a
result of incapacity due to mental or physical illness
which results in Executive being able to perform the
essential functions of his position, with or without
reasonable accommodation.
(4) "Termination Date" shall mean the date Executive is
terminated for any reason pursuant to this Agreement.
(5) "Termination Following a Change of Control" shall mean: (i)
a Termination of Executive without Cause by the Company in
connection with or within one (1) year following a Change
of
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Control; (ii) failure of any successor/surviving company to
adopt this Agreement; or (iii) a termination of Executive's
employment with the Company by Executive for any reason
within one (1) year following a Change of Control.
(b) Termination Following a Change of Control. In the event there is
a Termination Following a Change of Control, this Agreement
shall terminate and Executive shall be entitled to the following
severance benefits:
(1) For a period of twelve (12) months after the Termination
Date (the "Compensation Period"), Base Salary at the rate
in effect immediately prior to the Termination Event,
payable monthly, in arrears. In addition, the Company shall
remain obligated to maintain and keep all benefits set
forth in paragraphs 5(e) and (g) available to Executive at
the Company's expense for a period of one (1) year after
the Termination Date. Moreover, Executive shall receive at
no additional cost, the automobile and the certificate of
title to the automobile referenced in paragraph 5(c) free
of any lien, claim, or encumbrance.
(2) Any stock options which Executive has received shall vest
immediately, and all options required to be granted
pursuant to Paragraph 5(i) which have not been so granted,
shall be granted and shall vest immediately and the grant
price shall be the lowest price of the Company's common
stock during the 120 days prior to the announcement of such
Change in Control.
(3) If Executive receives any payments hereunder which are
subject to an excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any similar
tax imposed under federal, state, or local law
(collectively, "Excise Taxes"), the Company shall pay
Executive (on or before the date which Executive is
required to pay such Excise Taxes), 1) an additional amount
equal to all Excise Taxes then due and payable, and 2) the
amount necessary to defray Executive's increased (federal,
state, and local) income tax liability arising due to such
payments and any costs and expenses, including penalties
and interest incurred by Executive in connection with any
audit, proceedings, etc. related to the payment of such
Excise Taxes. For purposes of calculating the amount
payable to Executive under this Paragraph, the federal and
state income tax rates used shall be the highest marginal
federal and state rates applicable to ordinary income in
Executive's state of residence, taking into account any
federal income tax deductions or credits available to
Executive for state income taxes. The Company
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<PAGE>
shall cause its independent auditors to calculate such
amount and provide Executive a copy of such calculation at
least ten (10) days prior to the date specified above for
payment of such amount.
(4) All accrued compensation and unreimbursed expenses
through the Termination Date. Such amounts shall be paid to
Executive in a lump sum in cash within thirty (30) days
after the Termination Date along with the certificate of
title referenced in paragraph 6(b)(1) above.
(5) Executive, in addition to all other amounts, payments or
benefits provided hereunder, and in consideration of
Executive's agreement under Section 9 below, shall receive
a lump sum payment in the amount of one million five
hundred thousand dollars ($1,500,000), to be paid within
five (5) days following such Termination.
(6) Executive shall be free to accept other employment during
the Compensation Period, and there shall be no offset of
any employment compensation earned by Executive in such
other employment during the Compensation Period against
payments due to Executive hereunder, and there shall be no
offset of any compensation received from such other
employment against the Base Salary set forth above;
provided, however, that such compensation may terminate if
Executive violate any of the provisions of Section 9 below.
(c) Termination in Event of Death or Disability: Benefits.
If Executive's employment is terminated by reason of
Executive's death or Disability during the term of this
Agreement (the "Employment Period"), this Agreement shall
terminate without further obligation to Executive's legal
representatives under this Agreement, other than for payment of
all compensation under Section 5(a) otherwise due to Executive
during the Term hereof as if Executive had not died or become
disabled and, unreimbursed expenses and the timely payment or
provision of Other Benefits through the date of death or
Disability. The Section 5(a) compensation shall be payable
monthly in arrears at the Base Salary of Executive in effect
immediately preceding Executive's death or Disability. Such
other amounts shall be paid to Executive or Executive's estate
or beneficiary, as applicable, in a lump sum cash payment
within ninety (90) days after the date of death or Disability.
With respect to the provision of Other Benefits, the term Other
Benefits as used in this Paragraph 5(c) shall mean 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 such plans, programs,
practices, and policies relating to death or Disability
benefits, if any,
7
<PAGE>
as in effect with respect to other executives and their
beneficiaries at any time during the 120-day period immediately
preceding the date of death or Disability. Additionally, all
stock options for which Executive would have been eligible had
he completed the Term of this Agreement, shall be granted and
vest immediately, and Executive or Executive's estate or
beneficiary shall be vested in all other options held by
Executive as of the date of Executive's termination.
(d) Voluntary Termination by Employee and Termination for Cause:
Benefits. Executive may terminate his employment with the
Company by giving written notice of his intent and stating an
effective Termination Date at least ninety (90) days after the
date of such notice; provided, however, that the Company may
accelerate such effective date by paying Executive through the
proposed Termination Date. The Company may terminate Executive's
employment for Cause at any time without prior written notice.
Upon such termination by Executive or upon termination for Cause
by the Company, this Agreement shall terminate and the Company
shall pay to Executive all accrued compensation, and
unreimbursed expenses through the Termination Date. Such amounts
shall be paid to Executive in a lump sum in cash within thirty
(30) days after the date of termination.
(e) Termination Without Cause. The Company may terminate Executive's
employment without Cause at any time without prior notice. In
the event there is a termination without Cause, this Agreement
shall terminate and Executive shall only be entitled to the
following severance benefits:
(1) For a period of twelve (12) months after the Termination
Date (the "Compensation Period"), Base Salary at the rate
in effect immediately prior to the Termination Date,
payable monthly, in arrears. In addition, the Company shall
remain obligated to maintain and keep all benefits set
forth in paragraphs 5(e) and (g) available to Executive at
the Company's expense for a period of one (1) year after
the Termination Date.
(2) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to
Executive in a lump sum in cash within thirty (30) days
after the Termination Date; and
(3) Executive shall be free to accept other employment during
the Compensation Period, and there shall be no offset of
any employment compensation earned by Executive in such
other employment during the Compensation Period against
payments due to Executive hereunder, and there shall be no
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<PAGE>
offset of any compensation received from such other
employment against the Base Salary set forth above;
provided, however, that such compensation may terminate if
Executive violates any of the provisions of Section 9
below.
(f) Termination as Officer or Director. Upon any termination of
Executive's employment, Executive shall be deemed as having
tendered his resignation as an Officer and a Director of the
Company and each of its subsidiaries or related companies.
7. Indemnification, Liability Insurance. The Company shall indemnify and
hold Executive (or his legal representative) harmless to the full
extent permitted by applicable law for all legal expenses and all
liabilities, losses, judgments, fines, expenses, and amounts paid in
settlement in connection with any proceeding involving him (including
any action by or in the right of the Company) by reason of his being
or having been a director, officer, employee, consultant or agent of
the Company or any of its subsidiaries, affiliates, or any other
enterprise if he is serving or has served at the request of the
Company. In addition, the Company shall cause any such subsidiary,
affiliate, or enterprise also to so indemnify and hold Executive
harmless to the full extent permitted by applicable law. The
foregoing shall not be deemed to limit any rights of Executive
pursuant to applicable indemnification provisions of the Company's
Certificate of Incorporation or Bylaws or otherwise. In addition, the
Company shall acquire and maintain with reputable insurance companies
or associations acceptable to Executive, directors' and officers'
liability insurance for the benefit of Executive providing terms and
coverage amounts at least as favorable as those provided to other
officers or directors of the Company. Such insurance shall remain in
place (to the extent that the Company is able to purchase the same
for any officer or director) as long as necessary under applicable
statutes of limitations to cover all events occurring during the Term
of this Agreement regardless of when the claim is made.
8. Advance of Expenses. In the event of any action, proceeding or claim
against Executive arising out of his serving or having served in a
capacity specified in paragraph 6 above, the Company shall provide
Executive with counsel, who may be counsel for the Company as well,
as long as no conflict of interest exists between the Company and
Executive, and no ethical or professional responsibility rules
prevent the same counsel from representing both Executive and the
Company. In the event of any such conflict of interest or other bar
to Executive being represented by counsel for the Company, Executive
may retain his own separate counsel (such choice of counsel may be
made in his sole and absolute discretion), and the Company shall be
obligated to advance to Executive (or pay directly to his counsel)
reasonable counsel fees and other costs associated with Executive's
defense of such action, proceeding or claim; provided, however, that
in such event, Executive shall first agree in writing, without
posting bond or collateral, to repay all sums paid or advanced to him
pursuant to this
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provision in the event that the final disposition of such action,
proceeding or claim is one for which Executive would not be entitled
to indemnification pursuant to the provisions hereof.
9. Non-Competition and Non-Solicitation.
(a) Executive and the Company expressly agree that during the Term
and for a period of one (1) year immediately following the
termination of Executive's employment with the Company for any
reason, Executive will not, for himself, or on behalf of any
other person, persons, firm, partnership, company, corporation
or organization, engage in, or provide services to, directly or
indirectly, any casual dining restaurant business either as a
principal, partner, agent, employee, director, officer,
independent contractor, consultant, or in any other capacity in
the United States of America.
(b) Employee agrees that during his period of employment with the
Company and for a period of two years after the termination of
employment (for any reason), Employee will not, directly or
indirectly, solicit, divert, or hire away or attempt to solicit,
divert, or hire away any person employed by the Company, whether
or not such person is a full-time or temporary employee of the
Company and will not make known to any person, firm, entity, or
corporation the names and addresses of any of the employees of
the Company or any information pertaining to the employees of
the Company.
10. No Mitigation Required. Executive's rights hereunder upon termination
of employment shall be cumulative with and in addition to any other
rights or remedies he may be entitled to by reason of any such
termination. In addition, Executive shall have no obligation to
mitigate his damages hereunder, whether by seeking new employment or
otherwise, nor shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by Executive as the
result of employment by another employer after the date of
termination of Executive's employment with the Company, or otherwise.
11. Nondisclosure. Except as otherwise required by law or court order,
Executive, at any time during the Term, shall not disclose or use,
except in the course of Executive's employment with the Company in
the pursuit of the business of the Company or any of its subsidiaries
or affiliates, any confidential information or nonpublic proprietary
data of the Company or any of its subsidiaries or affiliates, whether
such information or proprietary data is in Executive's memory or
embodied in writing or other physical form. Upon termination of
employment with the Company for any reason whatsoever, Executive
shall forthwith deliver or cause to be delivered to the Company any
and all confidential information, including drawings, notebooks,
computers, keys, data, and other documents and materials belonging to
the Company which is in his possession or under Executive's
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control relating to the Company or the business of the Company, and
will deliver to the Company upon such termination of employment any
other property of the Company which is in his possession or under his
control.
12. Representations and Warranties. The Company represents and warrants
that the execution of this Agreement by the Company has been duly
authorized by resolution of the Board.
13. Entire Agreement. This Agreement constitutes the entire understanding
between Company and Executive relating to Executive's employment
hereunder and supersedes and cancels all prior written and oral
understandings and agreements with respect to such matters.
14. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon its
successors and assigns. The right and obligations of Executive under
this Agreement are of a personal nature and shall neither be assigned
nor transferred in whole or in part by Executive.
15. Miscellaneous.
(a) This Agreement shall be subject to and governed by the laws of
the state of Texas and venue shall lie in the courts of Harris
County.
(b) Failure by either party to insist upon strict compliance with
any provision hereof shall not be deemed a waiver of such
provision or any other provision hereof.
(c) This Agreement may not be modified except by an agreement in
writing executed by the parties hereto.
(d) No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or any breach
hereof, shall be deemed a waiver of such right in the future of
any other right or remedy available under this Agreement.
(e) The invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any other
provision.
(f) The section and paragraph headings contained in this Agreement
are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set out above.
LANDRY'S SEAFOOD RESTAURANTS, INC.
By: /s/ Tilman J. Fertitta
---------------------------------------
Name: Tilman J. Fertitta
----------------------------------
Title: President
---------------------------------
Executive: /s/ Paul S. West
--------------------------------
Paul S. West
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PERSONAL SERVICE AND EMPLOYMENT AGREEMENT
This Personal Service and Employment Agreement (the "Agreement") is made
and entered into effective as of January 1, 1998 (the "Execution Date"), by and
between LANDRY'S SEAFOOD RESTAURANTS, INC., a Delaware corporation (the
"Company") and Richard E. Ervin an individual ("Executive").
WHEREAS, the Company wishes to retain the services of Executive as
Vice President of Restaurant Operations of the Company, subject to and in
accordance with the terms and provisions of this Agreement; and
WHEREAS, Executive desires to be employed by the Company subject to and in
accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Engagement. The Company hereby engages and retains Executive to
perform the "Duties" (as hereinafter set forth) and Executive hereby
accepts the engagement to perform the Duties upon the terms and
conditions set forth herein.
2. Term. Subject to the other terms and provisions of the Agreement, the
term of this Agreement, unless sooner terminated, shall begin on the
Execution Date and shall expire on December 31, 2002 (the "Term").
3. Duties. During the Term, Executive shall serve as the Vice-President
of Restaurant Operations of the Company or such other office as shall
be mutually agreed upon by Executive and the Company. Executive shall
perform such duties and responsibilities as may be prescribed from
time to time by the Board of Directors of the Company (the "Board")
or the Company's Chief Executive Officer ("Chief Executive"). At the
request of the Chief Executive, Executive shall be nominated to serve
on the Board of Directors of the Company. At the Chief Executive's
request, Executive shall serve as an officer and/or on the Board of
Directors of one or more of the Company's subsidiaries. Without
limiting the foregoing, during the Term, Executive shall, in
accordance with this Agreement and the directions and policies from
time to time established by the Board and Chief Executive:
(a) Devote his full time, attention and energies to the Company, and
without the consent of the Board and Chief Executive, shall not
render any services of a business nature to any other person,
firm, corporation, or organization.
(b) Perform such services for the Company as shall be prescribed
from time to time by the Board and Chief Executive provided that
such services shall not be inconsistent with the normal and
customary duties of a company of similar character;
<PAGE>
(c) Use his best efforts to promote the interests and objectives of
the Company.
4. Stock Ownership. So long as Executive is employed by the Company or
serves on its Board of Directors, Executive shall maintain ownership
of no less than the greater of 8,000 shares of common stock in the
Company or twenty percent (20%) of Executive's total grant of vested
options for the current calendar year.
5. Compensation.
(a) For services rendered pursuant to this Agreement, the Company
shall pay to Executive a base salary (the "Base Salary")
calculated at a rate of $120,000 per annum, payable on a bi-
weekly basis. Such sums shall be reduced by applicable
withholding, FICA, and other necessary pay-related taxes. The
Company also agrees that the compensation committee of the
Board ("Compensation Committee") shall review Executive's
salary at least annually to determine if any salary increase is
appropriate in the discretionary and sole judgment of the
Compensation Committee. Any increase in the Base Salary or
other compensation granted by the Board shall in no way limit
or reduce any other obligation of the Company hereunder and,
once established at an increased specific rate, Executive's
Base Salary hereunder shall not thereafter be reduced. For
purposes of this Agreement, "Base Salary" shall mean
Executive's initial Base Salary or, if increased, the increased
Base Salary.
(b) Executive shall be entitled to participate in and receive bonus
awards under any bonus program established by the Company for
its management or key personnel. In the absence of or in
addition to such a program, Executive shall be entitled to
receive such bonus, if any, as may be determined from time to
time by the Compensation Committee in its discretionary and sole
judgment based on merit and the Company's performance.
(c) As of the date hereof, the Company shall provide Executive with
a new automobile suitable to Executive's position with the
Company. In addition, the Company shall either directly pay or
reimburse Executive for all costs of operating and maintaining
such automobile, including insurance thereon.
(d) The Company shall provide an expense allowance to Executive in
an amount to be set by the Board. In addition, throughout the
term of this Agreement, the Company shall reimburse Executive
for all reasonable business expenses (including expenses of
travel and entertainment) incurred by Executive. The Company
shall also pay directly or reimburse Executive for membership or
initiation fees and reasonable monthly dues (excluding
miscellaneous charges) for
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clubs located in the Greater Houston area that Executive deems
necessary to carry out the duties set forth herein. The
Company's obligation to pay for initiation fees shall not
exceed $10,000 during the Term. At least once a year during the
Term, and subject to availability as determined by the
Company's Chief Executive, the Company shall also provide
Executive with the use of Company transportation for his
personal use, benefit, and travel to and from a single
destination located within the continental United States.
(e) Executive shall be entitled to group life insurance, accidental
death and dismemberment insurance, hospitalization, surgical,
major medical coverage, long-term disability, and such other
insurance coverage that is made available to other executive
officers of the Company excluding the Chief Executive.
Provided, however, Executive shall only be entitled to such
insurance coverage to the extent that such coverage is provided
to all other executive officers of the Company excluding the
Chief Executive. The Company shall pay directly or reimburse
Executive for any medical expenses or charges not otherwise
paid for by the Company provided insurances, including
deductibles or any other charges, not to exceed $3,000 during
each year of the Term.
(f) During the Term of this Agreement, Executive shall be entitled
to twenty (20) paid vacation days per year, or such additional
numbers as may be determined by the Board from time to time.
For purpose of this paragraph, weekends shall not count as
vacation days, and Executive shall also be entitled to all paid
holidays given by the Company to its other executive officers.
The time or times at which Executive will be permitted to take
such vacation time shall be determined by the mutual agreement
of the Chief Executive and Executive.
(g) The Company shall provide Executive with $3,000,000 of split-
dollar variable life insurance (the "Policy") on the life of
Executive naming such beneficiaries thereunder as Executive
shall designate. The Policy shall be owned by Executive or his
designee.
(h) Each year of this Agreement, the Company shall make matching
charitable contributions to a charity or charities of
Executive's choice in the same amount made by Executive to the
charity or charities not to exceed a total amount of $10,000 in
any one year.
(i) During the Term of this Agreement, Executive shall be granted
no less than 125,000 stock options (the "Minimum Number") at a
price equal to the fair market value of the common stock at the
time of the grant or grants. The date of grant or grants shall
be in the sole discretion of the Stock Option Committee,
provided, however, that at least fifty percent of the Minimum
Number of options granted
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<PAGE>
hereunder shall be granted prior to December 31, 1999.
Executive shall have the right to exercise the stock options
for a term of ten (10) years. The stock options shall vest over
three (3) years from the respective dates of grant in equal
annual installments. All shares issuable to Executive upon
exercise of the options shall be registered pursuant to
applicable federal securities laws.
6. Termination.
(a) Definitions.
(1) "Cause" shall mean:
(i) Dishonesty which is not the result of an
inadvertent or innocent mistake of Executive with
respect to the Company or any of its subsidiaries;
(ii) Insubordination;
(iii) Willful misfeasance of duty by Executive intended
to injure or having the effect of injuring in some
material fashion the reputation, business, or
business relationships of the Company or any of its
subsidiaries or any of their respective officers,
directors, or employees;
(iv) Material violation by Executive of any term of this
Agreement;
(v) Conviction of Executive of any felony, any crime
involving moral turpitude or any crime other than a
vehicular offense which could reflect in some
material fashion unfavorably upon the Company or
any of its subsidiaries; and
(vi) Failure of Executive to perform the Duties required
hereunder.
(2) A "Change of Control" shall be deemed to have occurred if:
(i) Any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) other than a trustee or other fiduciary
holding securities under an employee benefit plan of
the Company becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of 50% or more of
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<PAGE>
the Company's then outstanding voting common stock;
or
(ii) At any time during any consecutive thirty-six (36)
month period (not including any period prior to the
date hereof), individuals who at the beginning of
such period constituted the Board (and any new
director whose election by the Board or whose
nomination for election by the Company's
stockholders were approved by a vote of at least
two-thirds of the directors then still in office who
either were directors at the beginning of such
period or whose election or nomination for election
was previously so approved) cease for any reason to
constitute a majority thereof, or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than merger or consolidation (a)
in which a majority of the directors of the
surviving entity were directors of the Company prior
to such consolidation or merger, or (b) which would
result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being changed into voting securities of the
surviving entity) more than 50% of the combined
voting power of the voting securities of the
surviving entity outstanding immediately after such
merger or consolidation; or
(iv) The stockholders approve a plan of complete
liquidation of the Company or an agreement for the
sale or disposition by the Company of all or
substantially all of the Company's assets.
(3) A "Disability" shall mean the absence of Executive from
his duties with the Company on a full-time basis for 180
consecutive days, or 180 days in a 365-day period, as a
result of incapacity due to mental or physical illness
which results in Executive being able to perform the
essential functions of his position, with or without
reasonable accommodation.
(4) "Termination Date" shall mean the date Executive is
terminated for any reason pursuant to this Agreement.
(5) "Termination Following a Change of Control" shall mean:
(i) a Termination of Executive without Cause by the
Company in connection with or within one (1) year
following a Change of
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Control; (ii) failure of any successor/surviving company
to adopt this Agreement; or (iii) a termination of
Executive's employment with the Company by Executive for
any reason within one (1) year following a Change of
Control.
(b) Termination Following a Change of Control. In the event there
is a Termination Following a Change of Control, this Agreement
shall terminate and Executive shall be entitled to the
following severance benefits:
(1) For a period of twelve (12) months after the Termination
Date (the "Compensation Period"), Base Salary at the rate
in effect immediately prior to the Termination Event,
payable monthly, in arrears. In addition, the Company
shall remain obligated to maintain and keep all benefits
set forth in paragraphs 5(e) and (g) available to
Executive at the Company's expense for a period of one (1)
year after the Termination Date. Moreover, Executive shall
receive at no additional cost, the automobile and the
certificate of title to the automobile referenced in
paragraph 5(c) free of any lien, claim, or encumbrance.
(2) Any stock options which Executive has received shall vest
immediately, and all options required to be granted
pursuant to Paragraph 5(i) which have not been so granted,
shall be granted and shall vest immediately and the grant
price shall be the lowest price of the Company's common
stock during the 120 days prior to the announcement of
such Change in Control.
(3) If Executive receives any payments hereunder which are
subject to an excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended, or any similar
tax imposed under federal, state, or local law
(collectively, "Excise Taxes"), the Company shall pay
Executive (on or before the date which Executive is
required to pay such Excise Taxes), 1) an additional
amount equal to all Excise Taxes then due and payable, and
2) the amount necessary to defray Executive's increased
(federal, state, and local) income tax liability arising
due to such payments and any costs and expenses, including
penalties and interest incurred by Executive in connection
with any audit, proceedings, etc. related to the payment
of such Excise Taxes. For purposes of calculating the
amount payable to Executive under this Paragraph, the
federal and state income tax rates used shall be the
highest marginal federal and state rates applicable to
ordinary income in Executive's state of residence, taking
into account any federal income tax deductions or credits
available to Executive for state income taxes. The Company
6
<PAGE>
shall cause its independent auditors to calculate such
amount and provide Executive a copy of such calculation at
least ten (10) days prior to the date specified above for
payment of such amount.
(4) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to
Executive in a lump sum in cash within thirty (30) days
after the Termination Date along with the certificate of
title referenced in paragraph 6(b)(1) above.
(5) Executive, in addition to all other amounts, payments or
benefits provided hereunder, and in consideration of
Executive's agreement under Section 9 below, shall receive
a lump sum payment in the amount of seven hundred fifty
thousand dollars ($750,000), to be paid within five (5)
days following such Termination.
(6) Executive shall be free to accept other employment during
the Compensation Period, and there shall be no offset of
any employment compensation earned by Executive in such
other employment during the Compensation Period against
payments due to Executive hereunder, and there shall be no
offset of any compensation received from such other
employment against the Base Salary set forth above;
provided, however, that such compensation may terminate if
Executive violate any of the provisions of Section 9
below.
(c) Termination In Event of Death or Disability: Benefits. If
Executive's employment is terminated by reason of Executive's
death or Disability during the term of this Agreement (the
"Employment Period"), this Agreement shall terminate without
further obligation to Executive's legal representatives under
this Agreement, other than for payment of all compensation
under Section 5(a) otherwise due to Executive during the Term
hereof as if Executive had not died or become disabled and,
unreimbursed expenses and the timely payment or provision of
Other Benefits through the date of death or Disability. The
Section 5(a) compensation shall be payable monthly in arrears
at the Base Salary of Executive in effect immediately preceding
Executive's death or Disability. Such other amounts shall be
paid to Executive or Executive's estate or beneficiary, as
applicable, in a lump sum cash payment within ninety (90) days
after the date of death or Disability. With respect to the
provision of Other Benefits, the term Other Benefits as used in
this Paragraph 5(c) shall mean 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 such plans, programs, practices, and policies
relating to death or Disability benefits if any
7
<PAGE>
as in effect with respect to other executives and their beneficiaries
at any time during the 120-day period immediately preceding the date
of death or Disability. Additionally, all stock options for which
Executive would have been eligible had he completed the Term of this
Agreement, shall be granted and vest immediately, and Executive or
Executive's estate or beneficiary shall be vested in all other
options held by Executive as of the date of Executive's termination.
(d) Volunta[y Termination bY Employee and Termination for Cause:
Benefits. Executive may terminate his employment with the
Company by giving written notice of his intent and stating an
effective Termination Date at least ninety (90) days after the
date of such notice; provided, however, that the Company may
accelerate such effective date by paying Executive through the
proposed Termination Date. The Company may terminate Executive's
employment for Cause at any time without prior written notice.
Upon such termination by Executive or upon termination for Cause
by the Company, this Agreement shall terminate and the Company
shall pay to Executive all accrued compensation, and
unreimbursed expenses through the Termination Date. Such amounts
shall be paid to Executive in a lump sum in cash within thirty
(30) days after the date of termination.
(e) Termination Without Cause. The Company may terminate Executive's
employment without Cause at any time without prior notice. In
the event there is a termination without Cause, this Agreement
shall terminate and Executive shall only be entitled to the
following severance benefits:
(1) For a period of twelve (12) months after the Termination
Date (the "Compensation Period"), Base Salary at the rate
in effect immediately prior to the Termination Date,
payable monthly, in arrears. In addition, the Company shall
remain obligated to maintain and keep all benefits set
forth in paragraphs 5(e) and (g) available to Executive at
the Company's expense for a period of one (1) year after
the Termination Date.
(2) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to
Executive in a lump sum in cash within thirty (30) days
after the Termination Date; and
(3) Executive shall be free to accept other employment during
the Compensation Period, and there shall be no offset of
any employment compensation earned by Executive in such
other employment during the Compensation Period against
payments due to Executive hereunder, and there shall be no
8
<PAGE>
offset of any compensation received from such other
employment against the Base Salary set forth above;
provided, however, that such compensation may terminate if
Executive violates any of the provisions of Section 9
below.
(f) Termination as Officer or Director. Upon any termination of
Executive's employment, Executive shall be deemed as having
tendered his resignation as an Officer and a Director of the
Company and each of its subsidiaries or related companies.
7. Indemnification: Liability Insurance. The Company shall indemnify
and hold Executive (or his legal representative) harmless to the
full extent permitted by applicable law for all legal expenses and
all liabilities, losses, judgments, fines, expenses, and amounts
paid in settlement in connection with any proceeding involving him
(including any action by or in the right of the Company) by reason
of his being or having been a director, officer, employee,
consultant or agent of the Company or any of its subsidiaries,
affiliates, or any other enterprise if he is serving or has served
at the request of the Company. In addition, the Company shall cause
any such subsidiary, affiliate, or enterprise also to so indemnify
and hold Executive harmless to the full extent permitted by
applicable law. The foregoing shall not be deemed to limit any
rights of Executive pursuant to applicable indemnification
provisions of the Company's Certificate of Incorporation or Bylaws
or otherwise. In addition, the Company shall acquire and maintain
with reputable insurance companies or associations acceptable to
Executive, directors' and officers' liability insurance for the
benefit of Executive providing terms and coverage amounts at least
as favorable as those provided to other officers or directors of the
Company. Such insurance shall remain in place (to the extent that
the Company is able to purchase the same for any officer or
director) as long as necessary under applicable statutes of
limitations to cover all events occurring during the Term of this
Agreement regardless of when the claim is made.
8. Advance of Expenses. In the event of any action, proceeding or claim
against Executive arising out of his serving or having served in a
capacity specified in paragraph 6 above, the Company shall provide
Executive with counsel, who may be counsel for the Company as well,
as long as no conflict of interest exists between the Company and
Executive, and no ethical or professional responsibility rules
prevent the same counsel from representing both Executive and the
Company. In the event of any such conflict of interest or other bar
to Executive being represented by counsel for the Company, Executive
may retain his own separate counsel (such choice of counsel may be
made in his sole and absolute discretion), and the Company shall be
obligated to advance to Executive (or pay directly to his counsel)
reasonable counsel fees and other costs associated with Executive's
defense of such action, proceeding or claim; provided, however, that
in such event, Executive shall first agree in writing, without
posting bond or collateral, to repay all sums paid or advanced to
him pursuant to this
9
<PAGE>
provision in the event that the final disposition of such action,
proceeding or claim is one for which Executive would not be entitled
to indemnification pursuant to the provisions hereof.
9. Non-Competition and Non-Solicitation.
(a) Executive and the Company expressly agree that during the Term
and for a period of one (1) year immediately following the
termination of Executive's employment with the Company for any
reason, Executive will not, for himself, or on behalf of any
other person, persons, firm, partnership, company, corporation
or organization, engage in, or provide services to, directly or
indirectly, any casual dining restaurant business either as a
principal, partner, agent, employee, director, officer,
independent contractor, consultant, or in any other capacity in
the United States of America.
(b) Employee agrees that during his period of employment with the
Company and for a period of two years after the termination of
employment (for any reason), Employee will not, directly or
indirectly, solicit, divert, or hire away or attempt to
solicit, divert, or hire away any person employed by the
Company, whether or not such person is a full-time or temporary
employee of the Company and will not make known to any person,
firm, entity, or corporation the names and addresses of any of
the employees of the Company or any information pertaining to
the employees of the Company.
10. No Mitigation Required. Executive's rights hereunder upon termination
of employment shall be cumulative with and in addition to any other
rights or remedies he may be entitled to by reason of any such
termination. In addition, Executive shall have no obligation to
mitigate his damages hereunder, whether by seeking new employment or
otherwise, nor shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by Executive as the
result of employment by another employer after the date of
termination of Executive's employment with the Company, or otherwise.
11. Nondisclosure. Except as otherwise required by law or court order,
Executive, at any time during the Term, shall not disclose or use,
except in the course of Executive's employment with the Company in
the pursuit of the business of the Company or any of its subsidiaries
or affiliates, any confidential information or nonpublic proprietary
data of the Company or any of its subsidiaries or affiliates, whether
such information or proprietary data is in Executive's memory or
embodied in writing or other physical form. Upon termination of
employment with the Company for any reason whatsoever, Executive
shall forthwith deliver or cause to be delivered to the Company any
and all confidential information, including drawings, notebooks,
computers, keys, data, and other documents and materials belonging to
the Company which is in his possession or under Executive's
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control relating to the Company or the business of the Company, and
will deliver to the Company upon such termination of employment any
other property of the Company which is in his possession or under his
control.
12. Representations and Warranties. The Company represents and warrants
that the execution of this Agreement by the Company has been duly
authorized by resolution of the Board.
13. Entire Agreement. This Agreement constitutes the entire understanding
between Company and Executive relating to Executive's employment
hereunder and supersedes and cancels all prior written and oral
understandings and agreements with respect to such matters.
14. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon its
successors and assigns. The right and obligations of Executive under
this Agreement are of a personal nature and shall neither be assigned
nor transferred in whole or in part by Executive.
15. Miscellaneous.
(a) This Agreement shall be subject to and governed by the laws of
the state of Texas and venue shall lie in the courts of Harris
County.
(b) Failure by either party to insist upon strict compliance with
any provision hereof shall not be deemed a waiver of such
provision or any other provision hereof.
(c) This Agreement may not be modified except by an agreement in
writing executed by the parties hereto.
(d) No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or any breach
hereof, shall be deemed a waiver of such right in the future of
any other right or remedy available under this Agreement.
(e) The invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any other
provision.
(f) The section and paragraph headings contained in this Agreement
are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first set out above.
LANDRY'S SEAFOOD RESTAURANTS, INC.
By: /s/ Tilman J. Fertitta
--------------------------------------
Name: Tilman J. Fertitta
----------------------------------
Title: President
---------------------------------
Executive: /s/ Richard E. Ervin
-------------------------------
Richard E. Ervin
12
<PAGE>
EXHIBIT 10.3
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment") is
entered into effective as of August 14, 1998, among LANDRY'S SEAFOOD
RESTAURANTS, INC., a Delaware corporation (the "Company"), BANK OF AMERICA
TEXAS, N.A. ("BofA"), as letter of credit issuing bank and as agent for the
Banks (BofA in its capacity as agent hereinafter referred to as "Agent"), THE
BANK OF NOVA SCOTIA, as co-agent, and the several financial institutions party
to the Credit Agreement as identified on the signature pages hereto
(collectively, the "Banks).
W I T N E S S E T H:
WHEREAS, Company, Agent and the Banks entered into that certain Credit
Agreement dated to be effective as of June 19, 1997 (the "Credit Agreement");
and
WHEREAS, in connection with the execution of the Credit Agreement, the
Company executed a Promissory Note payable to each Bank dated as of June 19,
1997 (the "Notes"); and
WHEREAS, the Obligations (as defined in the Credit Agreement) of the
Company were guaranteed by each of the Guarantors (as defined in the Credit
Agreement) pursuant to that certain Guaranty agreement (the "Guaranty") executed
by the Guarantors in favor of Agent, for the ratable benefit of the Banks, dated
as of June 19, 1997; and
WHEREAS, Company, Agent and the Banks desire to amend the Credit
Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Company, Guarantors, Agent and the Banks agree as follows:
1. Land and Restaurant Sales. The Banks acknowledge that the Company
intends to sell the following and the Banks have no objections to such sales
with the following provisos:
(a) the sale of that certain approximately 4 acre tract of land located
in Houston, Harris County, Texas, as more particularly described on Exhibit "A"
to this First Amendment, so long as such sale is made in compliance with Section
8.06 of the Credit Agreement; and
(b) the sale of approximately 6 restaurants (the "Restaurant Sales");
provided, however, that no more than $15,000,000.00 in write-downs or charges
incurred in connection with such Restaurant Sales shall be excluded from the
calculation of the financial covenants contained in Section 8.16 (Maximum
Leverage Ratio) or 8.17 (Minimum Fixed Charge Coverage Ratio) of the Credit
Agreement, and the calculation of the cap on cash dividends contained in Section
8.11(c) of the Credit Agreement, to the extent such write-downs or charges are
taken by the Company on or before December 31, 1998.
<PAGE>
2. Cash Dividends. Subsection (c) of Section 8.11 of the Credit
Agreement, Restricted Payments, is hereby deleted in its entirety and replaced
with the following:
(c) declare or pay cash dividends to its stockholders and purchase,
redeem or otherwise acquire shares of its capital stock or warrants,
rights or options to acquire any such shares for cash each fiscal year
in an amount not to exceed 15% of the net income of the Company for the
preceding fiscal year, computed on a consolidated basis, provided, that,
immediately after giving effect to such proposed action, no Default or
Event of Default would exist.
3. Stock Repurchase. Section 8.11 of the Credit Agreement, Restricted
Payments, is hereby amended by the addition of the following subsection:
(d) repurchase shares of its common stock in an amount not to exceed
$45,000,000.00. Any such repurchase shall be completed on or before
December 31, 1999.
4. Deferred Pre-Opening Costs. Deferred pre-opening costs of the
Company's restaurants which are required, due to new accounting standard AICPA
statement #98-5, to be expensed during the fourth quarter of fiscal year 1998
shall not be included in the calculation of the financial covenants contained in
Sections 8.16 (Maximum Leverage Ratio) or 8.17 (Minimum Fixed Charge Coverage
Ratio) of the Credit Agreement, or in the calculation of the cap on cash
dividends contained in Section 8.11(c) of the Credit Agreement; provided,
however, that the amount of such costs which may be excluded from the
calculation of the foregoing covenants shall not exceed $6,000,000.00.
5. Renewal; Continued Effect. Except as set forth above, the Credit
Agreement shall continue in full force and effect in accordance with its
original provisions.
6. Representations. To induce Agent and the Banks to enter into this
First Amendment, the Company ratifies and confirms each representation and
warranty set forth in the Credit Agreement as if such representations and
warranties were made on even date herewith, and further represents and warrants
(a) that no material adverse change has occurred in the financial condition or
business prospects of Company since the date of the last financial statements
delivered to Agent, (b) that no Event of Default exists and no event or
condition exists or has occurred which with passage of time, or notice, or both,
would become an Event of Default (a "Default"), and (c) that the Company is
fully authorized to enter into this First Amendment.
7. Conditions Precedent. As a condition to the effectiveness of this
First Amendment and to Agent and the Banks entering into this First Amendment,
no Default or Event of Default shall exist on the date hereof, and Agent must
have received executed originals of each of the following documents and
instruments, in form and substance satisfactory to Agent and the Banks:
<PAGE>
(a) Corporate resolutions of the Company and each of the
Guarantors (or comparable action for any Guarantor that is a partnership)
authorizing the execution of this First Amendment; and
(b) Such other documents or certificates as Agent or the Banks
may reasonably request.
8. Notes; Amendment and Ratification. Each of the Notes are hereby
amended such that the defined term "Credit Agreement" shall refer to the Credit
Agreement as amended by this First Amendment. The Company ratifies and confirms
each of the Notes and acknowledges and agrees that the Notes shall continue in
full force and effect, as amended hereby.
9. Guaranty Agreement; Amendment and Ratifications. The Guaranty is
hereby amended such that the defined term "Credit Agreement" shall refer to the
Credit Agreement as amended by this First Amendment. Each of the Guarantors
ratifies and confirms the Guaranty agreement delivered to Agent for the ratable
benefit of the Banks, and acknowledges and agrees that such Guaranty agreement
shall continue in full force and effect, as amended hereby and that pursuant to
such Guaranty agreement, such Guarantor has guaranteed payment and performance
of all Obligations.
10. Miscellaneous.
(a) Severability. In case any of the provisions of this First
Amendment shall for any reason be held to be invalid, illegal, or unenforceable,
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this First Amendment shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
(b) Capitalized Terms. Except as otherwise defined herein,
capitalized terms shall have the meanings specified in the Credit Agreement.
(c) Execution in Counterparts. This First Amendment may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may execute this
First Amendment by signing one or more counterparts.
(d) Governing Law. This First Amemdment shall be construed in
accordance with and governed by the laws of the State of Texas (without
reference to principles of conflicts of laws), provided, however, that Agent and
the Banks shall retain all rights under federal law.
(e) Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Company, the Guarantors, Agent and
the Banks, and their permitted successors and assigns, and no other Person shall
be a direct or indirect legal beneficiary of, or have any direct or indirect
cause of action or claim in connection with this First Amendment or any of the
other Loan Documents.
<PAGE>
(f) COMPLETE AGREEMENT. THIS WRITTEN FIRST AMENDMENT AND THE OTHER
WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
(g) The person executing this First Amendment on behalf of the
Guarantors, Tilman J. Fertitta, represents and warrants that he is a duly
authorized signatory of each of the Guarantors and that he is executing this
Guaranty on behalf of each of the Guarantors as the act and deed of each of the
Guarantors.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 41,551,439 41,551,439
<SECURITIES> 0 0
<RECEIVABLES> 13,425,552 13,425,552
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<INVENTORY> 22,564,497 22,564,497
<CURRENT-ASSETS> 87,915,856 87,915,856
<PP&E> 459,021,211 459,021,211
<DEPRECIATION> (44,489,548) (44,489,548)
<TOTAL-ASSETS> 509,550,080 509,550,080
<CURRENT-LIABILITIES> 40,761,100 40,761,100
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0 0
0 20
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<CGS> 32,916,061 93,664,137
<TOTAL-COSTS> 97,889,133 270,565,054
<OTHER-EXPENSES> (121,335) (1,317,049)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 11,584,705 41,188,066
<INCOME-TAX> 3,996,300 14,204,254
<INCOME-CONTINUING> 7,588,405 26,983,812
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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<NET-INCOME> 7,588,405 26,983,812
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