OPTION AGREEMENT

EXHIBIT 10.10

 

OPTION AGREEMENT

 

This OPTION AGREEMENT (“Agreement”) to lease property, is made this 20 ^th day of January, 2004 (“Effective Date”) by and between Henry J. Brabham, IV and Gail T. Brabham hereinafter collectively referred to as LESSOR, and Colonial Downs L.P., a Virginia limited partnership or its assignee, hereinafter referred to as LESSEE.

 

WITNESSETH:

 

LESSOR hereby grants LESSEE the Option to lease certain property in Vinton, Virginia as follows:

 

1.	GRANT OF OPTION: For one hundred twenty (120) days (“Option Period”) following execution of this Agreement, LESSOR grants to LESSEE the option to lease (“Option”) the property outlined herein.

 

2.	OPTION PRICE: LESSEE shall pay to LESSOR upon execution of this Agreement, $5,000 as consideration for such Option. Such amount shall be non-refundable but applicable against the first month’s rent under the Lease in the event LESSEE exercises the Option.

 

3.

PROPERTY: That certain property on Vineyard Road, Vinton, Virginia comprised of approximately 8.539 acres of land and improvements thereon, if any, and which are Parcels # 060.20-03-81.02.0000 and 060.20-03-81.03.0000 of the Tax Maps for Vinton, Virginia (“Property”). A map of the Property is attached as Exhibit A.

 

4.	LEASE. The lease between the parties (“Lease”) shall reflect the terms of this Agreement and be in substantially the same form as that attached as Exhibit B. The Lease shall be executed within five (5) days following exercise of the Option as provided herein.

 

5.

DUE DILIGENCE: Upon execution of this Agreement, LESSEE will evaluate the Property. During such evaluation, LESSEE shall conduct such tests as it deems necessary in its sole discretion, including but not limited to environmental and geotechnical tests and preparation of a survey and title report. LESSOR shall cooperate with LESSEE during its evaluation, including providing access to the Property, and provide to LESSEE copies of existing reports concerning the Property.

6.

EXERCISE OF THE OPTION: If LESSEE decides to exercise the Option granted herein, LESSEE will notify the LESSOR of its decision in writing before the end of the Option Period and the parties shall proceed to Lease execution as provided herein. If the LESSEE does not notify LESSOR before the end of the Option Period, then this Agreement shall expire and neither party shall have any further liability hereunder.

 

7.

LESSEE IMPROVEMENTS: LESSEE may, at LESSEE’S expense, construct one or more buildings and parking lot and other improvements on the Property, as it deems desirable, subject to applicable building codes. LESSOR agrees to cooperate with LESSEE in obtaining necessary governmental approvals for the construction and operation of such improvements and to execute such applications, consents, and estoppel certificates as may be required by governmental authorities or LESSEE’s lenders.

 

8.	OPTION TO BUY: The Lease will grant the LESSEE the option to buy (“Option to Buy”) the Property for $800,000 (“Purchase Price”).

 

9.

NOTICES: Any notice, request or demand required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed sufficiently given if, delivered by hand by messenger at the address of the intended recipient, sent prepaid by Federal Express (or a comparable guaranteed overnight delivery service), or deposited in the United States first class mail (registered or certified, postage prepaid, with return receipt requested), addressed to the intended recipient, at the intended recipient’s address set forth below, or at such other address as the intended recipient may have specified by written notice to the sender given in accordance with the requirements of this Paragraph. Any such notice, request or demand so given shall be deemed given on the day it is delivered by messenger at the specified address, or on the day of deposit in the United States Mail, as the case may be.

 

 

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10.	CHOICE OF LAWS: This Agreement shall be construed under the laws of the Commonwealth of Virginia.

 

11.	AUTHORITY: Each party signing below warrants and represents that he or it has the authority to execute this Agreement. This Agreement shall be binding on and inure to the benefit of each party’s successors and assigns.

 

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12.

AGENCY DISCLOSURE AND LEASING FEE: LESSEE agrees to pay the leasing firm, Olde Colony Realty, Inc. and its agent, Galen Conner, its agreed upon leasing commission. Otherwise, each party warrants to the other that no third party is entitled to a commission in connection with a lease or sale of the Property to LESSEE, pursuant to the Lease and Option to Buy granted herein.

 

Agreed and Accepted as of the Effective Date.

 

LESSEE:

 

 

LESSOR:

 

 

 

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EXHIBIT A

 

Property Map

 

 

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EXHIBIT B

 

GROUND LEASE

 

This GROUND LEASE (“Lease”) is made as of the      day of                      , 2004 (the “Effective Date”), between Henry Brabham, IV and Gail T. Brabham (collectively “LESSOR”) and Colonial Downs L.P., a Virginia limited partnership (“LESSEE”).

 

RECITALS .

 

A. LESSOR is the owner of property which consists of approximately 8.3539 acres of land located on Vineyard Road, in Vinton, Virginia (“Property”). A map of the Property is attached as Exhibit A.

 

B. LESSEE intends to lease from LESSOR the Property and construct a building of approximately 15,000 square foot of floor area on the Property, as well as all necessary site work and utility installations for use as an satellite wagering facility (collectively the “Building”), as well as certain parking areas, drives, sidewalks, lighting fixtures and landscaped areas (collectively the “Parking Facilities “), all in accordance with plans and specifications which are subject to LESSOR’s reasonable approval in writing by LESSOR. The Building and the Parking Facilities shall be referred to collectively herein as the “Improvements”.

 

C. LESSEE will lease the Property and construct the Improvements on the terms and conditions set forth herein. The Property and Improvements shall be referred to collectively herein as the “Premises”.

 

WITNESSETH

 

NOW THEREFORE, in consideration of the mutual promises hereinafter set forth, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, LESSOR and LESSEE hereby agree as follows:

 

1. AGREEMENT TO LEASE

 

A. Grant . LESSOR hereby leases to LESSEE and LESSEE hereby takes from LESSOR the Property and agrees to use, occupy and lease the same in accordance with the terms and provisions hereof. The Property shall be free of mortgages and other liens and encumbrances for the benefit of LESSOR, except utility easements and public rights-of-way.

 

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B. Term . The term (the “Term”) of this Lease shall commence as of the Effective Date. Rent, as prescribed herein, shall commence on the earlier to occur of the issuance of a certificate of occupancy for the Improvements, and six months from the date of this Lease (the “Rent Commencement Date”). The initial Term shall end on the last day of the fifth (5 ^th ) Lease Year (as defined below) thereafter, unless sooner terminated or extended as hereinafter provided. The term “Lease Year” as used herein shall mean a period of twelve (12) consecutive calendar months, provided, however, that the first Lease Year shall begin on the Rent Commencement Date and shall end on the last day of the twelfth (12 ^th ) full calendar month thereafter. The second Lease Year shall commence on the next succeeding day. Subsequent Lease Years shall begin and end on the anniversary of the first and last day of the second Lease Year, respectively. In addition, LESSOR grants to LESSEE the right to extend the Term for five (5) renewal periods (“Renewal Periods”) of five (5) years each, which may be exercised by written notice to the LESSOR sixty (60) days before the end of the Term or then current Renewal Period, as applicable.

 

2. RENT.

 

A. Base Rent . LESSEE agrees to pay LESSOR for the Property, without demand, offset or deduction, base annual rent (“Base Rent”) in the amount of One Hundred Twenty Thousand Dollars ($120,000). Base Rent shall increase beginning on the first day of each Renewal Period by 10% over the Base Rent of the Term or the preceding Renewal Period.

 

B. Commencement . Base Rent shall be payable in advance in lawful money of the United States in monthly installments during the Term of this Lease, beginning on the Rent Commencement Date, and continuing thereafter on or before the first day of each month during the Term (each such date being referred to herein as a “Due Date”). All Rent due under this Lease shall be payable by LESSEE to LESSOR at LESSOR’s address set forth in Paragraph 27 below or to such other place as LESSOR shall from time to time designate in writing. Rent mailed shall be deemed paid on the date payment is received by LESSOR. If the Rent Commencement Date or termination date is not the first day of the month, Base Rent shall be prorated for the number of days this Lease is in effect during such months.

 

C. Late Charge; Default Rate . If LESSEE fails to pay Base Rent within five (5) days after the Due Date, LESSEE shall promptly pay to LESSOR a service charge of five percent (5%) of the Rent then due. If any installment of the Base Rent is not paid when due and remains unpaid after expiration of any applicable cure period provided for herein, such Rent, as increased by the five percent (5%) service charge, shall bear interest from the Due Date at an annual rate equal to 8% until paid.

 

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3. CONSTRUCTION OF FACILITIES. Promptly after the execution and delivery of this Lease, LESSEE shall turn the Property over to LESSEE and LESSEE shall take or cause to be taken all actions necessary for the installation of the Improvements (“LESSEE’s Work”).

 

4. USE OF PREMISES. The Premises shall be used and occupied only for uses permitted under the zoning district in which the Premises is located (the “Permitted Uses”).

 

5. CONSTRUCTION OF IMPROVEMENTS

 

A. LESSEE’s Work . LESSEE shall promptly commence LESSEE’s Work and pursue LESSEE’s Work with due diligence to completion in a good and workmanlike manner and in compliance with LESSEE’s Plans (defined below), all applicable laws, orders and regulations of all governmental authorities having jurisdiction over the construction of the Improvements. All costs of such construction, including, without limitation, engineering and architectural expenses, survey expenses, costs of all required licenses and permits and actual construction costs, shall be borne solely by LESSEE. The Improvements shall be completed in accordance with plans and specifications (“LESSEE’s Plans”) which shall be submitted by LESSEE to LESSOR for LESSOR’s written approval (Building exterior and Parking Facilities only) prior to the beginning of any such construction, which approval shall not be unreasonably withheld, conditioned, or delayed. LESSEE shall have the right, at LESSEE’s sole expense, from time to time to submit, in its own name or in LESSOR’s name if so required, applications for such building permits and other construction approvals, and with the prior written approval of the LESSOR, which approval shall not be unreasonably withheld, delayed, or conditioned. LESSOR will, at no out-of-pocket cost to LESSOR, join in such applications if requested to do so by LESSEE. During the course of construction of the Improvements, LESSOR may enter upon the Property during business hours for purposes of inspecting the work.

 

B. Acceptance of Premises . LESSEE hereby accepts the Property “AS IS, WHERE IS” condition as of the date hereof subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing use and occupancy of the Property, and any covenants or restrictions of record. LESSEE acknowledges and agrees that LESSOR has made no representations or warranties as to the present or future use or condition of the Property and shall not be responsible for obtaining any licenses or permits necessary for LESSEE to construct the Improvements or to occupy or conduct the Permitted Uses on the Property.

 

C. Title . Title to the Improvements, as well as all furniture, equipment and trade fixtures (collectively “Trade Fixtures”), shall be vested in

 

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LESSEE for the Term. At such time as this Lease expires or is terminated, whether by operation of law or otherwise, title in the Improvements but not the Trade Fixtures shall automatically vest in LESSOR without the necessity of any further action by LESSOR or LESSEE.

 

6. ASSIGNMENT AND SUBLEASING.

 

A. Right to Assign . Except for transfers to Affiliates (as defined herein), LESSEE may not assign this Lease or any interest herein, without in each instance having first obtained LESSOR’s prior written approval, which approval shall not be unreasonably withheld, delayed, or conditioned.

 

B. Right to Sublet . LESSEE may not sublet the Premises, in whole or part, without the prior written approval of the LESSOR, which approval shall not be unreasonably withheld, delayed, or conditioned.

 

C. Affiliate . As used herein, an “Affiliate” shall be (i) any entity that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with LESSEE or (ii) any entity of which is a general partner or trustee, or with respect to which LESSEE serves in a similar capacity.

 

7. MORTGAGES OF LESSEE’S INTEREST. LESSOR shall not mortgage its interest in the Property during the Term, including Renewal Periods, of this Lease. LESSOR acknowledges that LESSEE may be obligated to mortgage its interests hereunder to Wells Fargo Bank, N.A., as trustee, or any successor trustee under an indenture with Jacobs Entertainment, Inc., parent of LESSEE, and hereby consents to such mortgage.

 

8. TAXES.

 

A. Obligation to Pay . As used herein, “Taxes” shall mean all real estate taxes, assessments and other governmental, quasi-governmental or private levies and charges of every kind, including any assessments, reimbursements or charges that may be imposed on the Premises, whether general or special, ordinary or extraordinary, unforeseen or foreseen (including any interest or penalty) or which may be imposed, levied, assessed or confirmed by any lawful taxing authorities or which may become a lien or charge on or against all or any part of the Premises at any time during the Term, or any tax in lieu thereof. LESSEE shall pay to LESSOR, or directly to the taxing authority at least ten (10) days prior to delinquency, all Taxes assessed against the Premises and shall simultaneously provide evidence of such payment to LESSOR.

 

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B. Contest . LESSEE may, if in good faith and upon reasonable grounds it disputes the amount or validity of any Taxes, contest and defend against the same and in good faith diligently conduct any necessary proceedings to prevent and avoid the same. LESSOR agrees that any contest or review initiated by LESSEE as provided herein may be maintained at the election of LESSEE in the name of LESSEE or in the name of LESSOR or in the name of both LESSOR and LESSEE. LESSOR agrees to join in any such contest or review if required by law or regulations and further agrees to execute and acknowledge such documents, instruments, assents and other papers as may be required or necessary, all at no cost to LESSOR. The legal proceedings referred to in this Subparagraph which may be prosecuted by LESSEE shall include appeals from any judgments, decrees, or orders and such review or determinations of any administrative bodies and offices as may be appropriate. Taxes payable by LESSEE hereunder shall be prorated during the first Lease Year and the last Lease Year on a calendar year basis.

 

C. Personal Property Tax . LESSEE shall be liable for and shall pay by the due date all taxes levied against any personal property or trade fixtures placed by LESSEE in or about the Premises.

 

9. MECHANICS’ LIENS. LESSEE covenants not to permit any lien to be filed against the Premises on account of nonpayment or disputes with respect to labor or materials furnished to the Premises or Improvements for or on behalf of LESSEE or any party claiming by, through, or under LESSEE, nor shall it permit any judgment lien or attachment to lie against the Premises. Should any lien of any nature, including but not limited to the foregoing, be filed against the Premises, other than liens created or caused by LESSOR, LESSEE shall, within sixty (60) days, cause said lien to be removed by payment, substitution of collateral, posting a bond therefor, or such other method as may be acceptable to LESSOR in its sole discretion. LESSEE shall indemnify, defend, and hold LESSOR harmless from any liability or expense incurred by LESSOR on account of any such claim, including, but not limited to, LESSOR’s reasonable attorneys’ fees.

 

10. MAINTENANCE, REPAIRS AND REPLACEMENTS.

 

A. Obligations to Maintain Building . During the Term, LESSEE shall keep the Improvements in a clean, orderly condition, free of dirt, rubbish, and termites and other insects. In addition, LESSEE shall be solely responsible for all maintenance, repairs and replacements of and to the Improvements, including, but not limited to, maintenance, repairs and/or replacements to the foundations, ceilings, floors, roof, lighting, walls, plumbing, heating, electrical, air conditioning, plate glass and windows and all other interior and exterior components of the Building and LESSEE’s signage whether attached to or detached from the Building.

 

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B. Surrender . At the termination of this Lease, LESSEE shall deliver the Premises to LESSOR in broom clean condition, and otherwise in the same good and sanitary order and condition in which LESSEE is obligated to maintain the Premises during the Term, reasonable wear and tear excepted.

 

11. ALTERATIONS, CHANGES, AND IMPROVEMENTS.

 

A. Permitted Alterations . LESSEE shall not make or permit any alterations, additions or improvements to the exterior of the Building or Parking Facilities, without the prior written consent of the LESSOR which shall not be unreasonably withheld, delayed, or conditioned. The cost of making such alterations, improvements or additions and preparing said plans shall be borne by LESSEE. All such work shall be done in a good and workmanlike manner. All such work shall comply with all laws, ordinances or regulations of any governmental or administrative agency having jurisdiction over the Premises, including any appropriate boards, commissions and underwriting agencies now or hereafter exercising similar rights and powers.

 

B. Trade Fixtures . LESSEE shall have the right at all times and at its sole expense to install LESSEE’s Trade Fixtures, provided that LESSEE complies with all applicable governmental laws, ordinances and regulations. LESSEE shall upon the termination of this Lease, remove any of LESSEE’s previously installed Trade Fixtures, provided further that LESSEE shall immediately repair any damage caused by such removal.

 

12. ESTOPPEL CERTIFICATES. LESSEE and LESSOR each agree at any time and from time to time within ten (10) days after a written request, to execute, acknowledge and deliver to the other a statement, in writing, and in form and substance reasonably acceptable to LESSOR and LESSEE, certifying that this Lease is unmodified and in full force and effect (or if there have been modifications that this Lease is in full force and effect as modified and stating the modifications), and the dates to which the Rent and other charges have been paid in advance, if any.

 

13. DELIVERY OF POSSESSION. Possession of the Property shall be delivered to LESSEE upon execution of this Lease. LESSEE shall have the right to specific performance to compel delivery of possession as provided herein.

 

14. UTILITIES.

 

A. Connection to Utilities . LESSEE shall arrange for the construction, installation, connection and operation of, and shall pay the cost of, all utility services, including, without limitation, water, sewer, gas, heat, cooling, power, telephone service and all other services to the Premises during the Term and

 

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LESSEE shall make payments when due directly to the utility or service company involved. LESSEE’s obligation to pay its utility bills during the Term shall survive the termination of this Lease. LESSOR shall not be required to pay for any connection fees, services, supplies or upkeep in connection with utilities or other services to the Premises.

 

B. Liability . LESSOR shall not be liable in damages or otherwise to LESSEE or to persons or property, if any utility service to the Premises is interrupted or terminated, unless caused by LESSOR’s gross negligence or willful misconduct, nor shall any such interruption or termination be construed as an eviction (actual or constructive) of LESSEE, nor work an abatement of any Rent, nor relieve LESSEE from the obligation to fulfill each and every covenant or condition of this Lease, other than as a result of LESSOR’s gross negligence or willful misconduct.

 

15. COMPLIANCE WITH LAWS, REGULATIONS AND RESTRICTIONS. LESSEE shall comply with all governmental laws, rules, orders, ordinances, directions, regulations, and requirements of federal, state, county and municipal authorities, now in force or which hereafter may be in force, which shall impose any duty upon LESSOR or LESSEE with respect to the use, occupation or alteration of the Premises, or the operations conducted by LESSEE at the Premises, whether material or incidental to said use and shall promptly comply with all changes in governmental laws, ordinances, regulations, orders and directives and all restrictions and covenants of record affecting the Premises, including but not limited to the correction, prevention and abatement of nuisances in, upon, or connected with the Premises, all at LESSEE’s sole risk and expense.

 

16. FIRE AND CASUALTY DAMAGE. If the Property and/or Improvements are damaged or destroyed by fire or other cause, LESSEE shall give immediate notice thereof to LESSOR. The rights and obligations of LESSOR and LESSEE in the event of such casualty shall be as follows:

 

A. Cost of Restoration Not Exceeding Fifty Percent of Replacement Value . If during the Term of this Lease the Improvements are so damaged or destroyed by fire or other casualty that the cost of restoration shall not exceed fifty percent (50%) of the replacement value thereof, exclusive of foundations, immediately prior to such damage, then the LESSEE, at its so