City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
CARD ROOM OPERATING AGREEMENT
[Seven Mile Casino]
This CARD ROOM OPERATING AGREEMENT (“Agreement”) is entered into effective as of April 15, 2025 (“Effective Date”) by and between Stones South Bay Corp. , a California corporation, dba Seven Mile Casino (“Operator”), and the CITY OF CHULA VISTA, a chartered municipal corporation (“City”) with reference to the following facts:
A. Operator holds a consolidated cardroom license (“License”) issued by the City that allows it to operate a cardroom within City limits subject to any and all requirements imposed by state law, the Chula Vista Municipal Code (“CVMC”), and local land use permits issued pursuant thereto.
B. Pursuant to the terms of the License and local law , Operator currently owns and operates a cardroom known as Seven Mile Casino located at 285 Bay Boulevard, Chula Vista California (“CV Cardroom”).
C. City and Operator previously entered into a cardroom operating agreement on July 1, 2019; such agreement was extended through April 14, 2025.
D. In consideration of Operator’s commitment to pay to the City any and all amount s required by this Agreement as provided for in Section 3, City is willing to provide Operator with the certainty of a one year operating term for the CV Cardroom , with an option to extend the agreement for four additional years, on the terms set forth herein.
E. This Agreement implements the requirements for continued operation of the CV Cardroom, on terms mutually agreeable to the parties, all as more particularly provided herein below.
NOW, THEREFORE, in consideration of the above recitals, the mutual covenants and conditions contained herein, and of other good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, City and Operator hereby agree as follows:
1. Agreement to Abide by Local Law. Operator agrees to abide by any and all provisions of local law, including the Chula Vista Municipal Code , City ordinances and resolutions, and any Gaming Plan in effect ( collectively “Appliable Local Law”) , and acknowledges and agrees that each and every provision of Applicable Local Law is valid and enforceable by the City with respect to the Operator and the CV Cardroom . Operator makes this Ag reement on its own behalf, on behalf of any valid successors or assigns thereto, and on behalf of any and all parties deemed by the City to have a financial interest in the License or the CV Cardroom (collectively, the “Licensed Parties”). By signing this Agreement where indicated below, the Licensed Parties agree to be bound by this provision.
2. Specific Agreement to Make Payments Required by Applicable Local Law and this Agreement. Operator agrees to pay to the City the license fees provided for in Section 3 of this
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
Agreement and Applicable Local Law. In consideration of City’s obligations under Section 4 of this Agreement, Operator further agrees: (a) to continue to make such payments to the City in the same amounts and on the same terms specified in Section 3 hereof and Applicable Local Law, as applicable; and (b) to meet and confer with the City to develop and implement, if City deems necessary or appropriate, an alternative mechanism for the continuation of such payments throughout the term of this Agreement, and thereafter.
3. License Fees.
3.1 In General. Operator shall pay to City a Per Table Fee and a Gross Gaming Revenue Fee (Per Table Fee and Gross Gaming Revenue Fee collectively, “License Fee”).
3.1.1 Amount of Fees
a. Per Table Fee : The fee shall be based upon the number of tables that are licensed and operated by CV Cardroom . The fee shall be based upon the maximum number of tables so licensed and permitted based upon the category of license issued with respect thereto, regardless o f the number of tables that may actually be operated on any given day or the category of game conducted thereon.
Notwithstanding the foregoing, if the City approves new tables, but State approval is required before the operation of any such new tables, the license fee set forth below, with respect to such new tables, shall not go into effect until the date the required State approval is obtained.
i. Category I: Effective April 15, 2025, the Per Table Fee for each card table in a cardroom licensed to Play Category I games shall be $3,825 per card table per annual quarter. This rate shall apply to the maximum number of tables licensed and approved to be operated at the cardroom location regardless of whether or not such tables are actively being used, and regardless of whether or not Category I games are actually being played at such tables.
ii. Category II: Effective April 15, 2025, the Per Table Fee for each card table in a cardroom licensed to play Category II games shall be $10, 737 per table per annual quarter. This rate shall apply to the maximum number of tables licensed and approved to be operated at the cardroom location regardless of whether or not such tables are actively being used, and regardless of whether or not Category I I games are actually being played at such tables.
b. Gross Gaming Revenue Fee: Effective October 1, 2025, a quarterly fee based on the total sum equal to one percent of the licensed cardroom’s Gross Gaming Revenue. “Gross Gaming Revenue” means the sum of all money generated or received by the licensed cardroom for the play of all Category I and Category II games, without subtracting any costs or expenses.
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
3.1.2 Procedures for Payment of Fees
a. Per Table Fee. The Per Table Fee provided hereunder shall b e payable quarterly in advance by no later than the day falling fifteen (15) days prior to the first day of each calendar quarter.
b. Gross Gaming Revenue Fee. Operator shall pay the Gross Gaming Revenue Fee owed in quarterly installments based on CV Cardroo m’s Gross Gaming Revenue for each 3-month operating period during a July 1 through June 30 fiscal year. Quarterly installments shall be due and payable as follows: November 20 (for the July 1 through September 30 quarter); February 20 (for the October 1 through December 31 quarter); May 20 (for the January 1 through March 31 quarter); and August 20 (for the April 1 through June 30 quarter). Each quarterly installment shall be accompanied by a written report stating CV Cardroom Gross Gaming Revenue for th e previous 3 -month period and a running total of CV Cardroom Revenue and Gross Gaming Revenue Fees for that fiscal year. The quarterly report shall be submitted in a form and with such back up information as may be reasonably required by the City’s Financ e Director. Late payments shall accrue interest at a penalty rate of 10% per annum until paid.
3.2 Audit Rights. The City shall have the right to conduct an independent audit of licensee's accounting records at any time upon three (3) business days prior written notice to licensee.
The audit shall be performed by a party designated by the City, subject to the reasonable approval of licensee. If the City elects to conduct such an audit, the licensee shall be responsible for reimbursing City costs incurr ed in connection therewith. The licensee's reimbursement obligation under this Section shall not exceed $10,000.00 for any twelve (12) month period.
3.3 Fee Receipt. The Finance Director shall issue a receipt for each licensed cardroom and such receipt shall be displayed on the premises during the full term for which such receipt was issued.
3.4 Annual Increase in Per Table Fee. The Per Table Fee amounts set forth in Section 3.1 shall be increased by two percent (2%) per year. The first increase shall take effect on January 1, 2026 and each subsequent increase shall take effect on each January 1 thereafter. This annual base rate increase shall apply to all tables licensed and approved in the previous year regardless of whether or not such tables were put into service that year.
3.4.1 Annual Statement; Reconciliation . Each April 1st Operator shall submit to the City’s Finance Director a certified financial statement of CV Cardroom Gross Gaming Revenue for the previous year (January 1 through December 31) (the “Annual Financial Statement”). The Annual Financial Statement shall be submitted in a form and with such back up information as may be reasonably required by the City’s Finance Director and shall include, at a minimum (a) the Per Table Fee and Gross Gaming Revenue Fee paid for that previous year, and (b) any proposed adjustments to such amount requiring
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
additional payments or refunds, as the case may be, based upon the now certified financials for the previous fiscal year. The timing for reporting and reconciliation process under this Section may be modified with the approval of the City’s Finance Director.
3.5. Possible Adjustments Based Upon Material Law Changes. If a court of law or a state agency determines that games or gaming activities that are currently licensed to be played at the CV Cardroom generating ten percent (10%) or more of CV Cardroom Gross Gaming Revenue can no longer be played in the same manner previously licensed to the Operator as of April 1 5, 2025 (“Material Law Changes”), the parties agree to meet and confer to evaluate possible alternative license fee payment structures and/or amounts to take into account the possible negative impacts such Material Law Changes are projected to have on CV Cardroom Gross Gaming Revenues. The parties will use their best efforts to negotiate a new agreement prior to the effective date of the Material Law Changes . Any such agreement shall be subject to City Council approval in its sole discretion. Notwithstanding the foregoing, if the parties are unable to negotiate a new agreement prior to the effective date of the Material Law Changes, the City Manager in consultation with the Director of Finance may, in the City Manager’s sole discretion, negotiate, approve, and implement an interim license fee valid from the effective date of Material Law Changes until the date of City Council ’s approval of a revised license fee or six months, whichever is sooner .
Operator shall not owe any License Fee to City on a pro rata basis for the timeframe when CV Cardroom is legally prohibited from operating and ceases to operate any gaming tables.
3.6 Possible Adjustments Based Upon Force Majeure Events . If there is a state of emergency, pandemic, or other natural disaster that inhibits the Operator’s ab ility to be open for business or otherwise make the payments required by this Section 3 (“Force Majeure Event”) , the Operator may request the City, by sending a written to the City Manager, allow for an alternate timeline or payment structure for the duration of the Force Majeure Event. The City Manager shall have the sole and absolute discretion to determine whether or not to grant the request and the terms of the temporary modification. Operator shall not owe any Per Table License Fee to City on a pro rata basis for the timeframe when CV Cardroom cannot operate due to a Force Majeure Event, and is therefore closed and not receiving any revenue.
4. Vested Operating Term.
4.1 In consideration for Operator’s commitments under Section 2 hereof, Operator shall have the right to operate a card room in the City for a period of one year (the “Vested Operating Term”). The Vested Operating Term shall commence on the Effective Date and shall expire on April 14 , 20 26. If there is no Material Law Change during the Vested Operating Term, then the Vested Operating Term shall automatically extend for up to four one-year extension terms as long as there remains no Material Law Change during e ach one-year extension. If a Material Law Change occurs during the Vested Operating Term, there shall be no automatic extensions of the Vested Operating Term; instead the City shall have the option in its sole discretion to extend the Agreement for up to four additional one- year terms . Notwithstanding the foregoing, all other City rights and remedies under
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
Applicable Local Law and any permits issued thereunder, shall remain in full force and effect during the Vested Operating Term and any and all extension terms.
4.2 Operator rights under this Section 4 are expressly conditioned upon (a) owning and maintaining its License in good standing; (b) remaining in full compliance with any and all applicable federal, state, and local laws, regulations, and permits; and (c) remaining in full compliance with the terms of Applicable Local Law, and the terms and conditions of this Agreement.
5. Indemnity, Waiver, and Release.
5.1 Indemnity.
5.1.1 To the maximum extent allowed by law, Operator agrees to protect, defend, indemnify and hold harmless City and its officers, agents, employees, attorneys, elected and appointed officials, including their respective successors and assigns (collectively, “Indemnified Parties”), from and against any and all losses, liabilities, costs, charges or fees (including reasonable attorneys’ fees and court costs) arising from any legal challenges to (1) the issuance of any cardroom license to Operator, (2) City’s adoption of Applicable Local Law, or (3) the legal validity of any provision of Applicable Local Law or this Agreement; excluding, however, any such legal challenge initiated or directed by one or more Indemnified Parties. Any defense provided hereunder shall be with legal counsel of City’s choice, subject to Operator’s reasonable approval. The provisions of this Section 5.1 shall survive the termination of this Agreement, but shall be effective only as to those legal challenges which are made during the term of this Agreement.
5.2 Release. Operator hereby releases, acquits and forever discharges City and its officers, agents, employees, attorneys, elected and appointed officials, including their respective successors and assigns, from any and all claims, rights, demands, actions, obligations, and causes of action (collectively, “Claims”) arising out of or related to the City’s adoption of Applicable Local Law, and the legal validity of each and every provision of this Agreement and Applicable Local Law as applied to Operator, whether any such Claim is known or unknown, that Operator may now have or has ever had, against the City, including, without limitation, any and all Claims for damages, declaratory or injunctive relief or attorney’s fees related thereto. It is understood and agreed that this is a full and final release applying not only to all Claims defined above that are presently known, anticipated or disclosed, but also as to all claims as defined above that are presently unknown, unanticipated, and undisclosed in any way, and all rights or benefits that Operator may now have, or may have in the future
With respect to all releases and waivers made by Operator under or pursuant to this Agreement, Operator hereby waives the application and benefits of California Civil Code § 1542 and hereby verifies that it has read and understand the following provision of California Civil Code § 1542:
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
"A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.”
Operator’s Initials: ______________
This release shall not apply to claims which Operator may have that have arisen due to the building permit/conditional use permit processes of the City by which Operator has applied in Chula Vista.
5.3. Survival. Operator’s obligations under this Section 5 shall survive the termination of this Agreement.
6. Default and Remedies.
6.1 In General. Failure by either party to perform any of its obligations as provided in this Agreement shall constitute an event of default under this Agreement. The non - defaulting party shall give written notice of a default to the defaulting party, specifying the nature of the default and the action required to cure the default. If the default remains uncured for twenty (20) days after the date of such notice it shall be deemed an “uncured default” and the non -defaulting party may pursue the remedies a scribed thereto, as provided below. In the case of a default which cannot reasonably be cured within 20 days, a party's failure to perform shall not constitute a default hereunder provided the party undertakes to cure the failure promptly, and in any event within twenty days, and diligently and continuously attempts to complete the cure as soon as reasonably possible.
6.2 Exclusive Remedies.
6.2.1 In the event of an uncured default by City, Operator’s sole remedy shall be for specific performance, injunction, or other equitable relief. Operator acknowledges that City would not have entered into this Agreement if City could become liable for monetary damages with respect to this Agreement. Consequently, City shall have no liability for monetary damages for the breach of this Agreement to Operator or any third party; provided, however, if Operator is the prevailing party in any action for specific performance, injunction or other equitable relief, Operator may be entitled to attorneys’ fees as provided in Section 9.1, below. The above proscription against Operator being awarded monetary damages shall not apply in the case where Operator proves that City unlawfully exercised its police powers in the regulation of the operation of the cardroom under the Applicable Local Law.
6.2.2 In the event of an uncured default by Operator, City shall have all remedies available at law or in equity, including termination of this Agreement, specific performance and monetary damages.
7. Representation by Legal Counsel. Operator and its principals acknowledge and agree
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
that they have been represented by legal counsel in the preparation of this Agreement; that they have read the agreement; that they are fully aware of its contents and of its legal effect; that al l agreements and understandings between the parties to the Agreement are embodied and expressed herein; that they enter into this Agreement freely, without coercion, and based on the parties’ own judgment and not in reliance on any representations or promi ses made by the City or any party; and that the parties exercising this agreement on behalf of Operator and its principals are fully authorized to do so without any further action by any other party or any governing board.
8. Assignment. Operator shall not assign this Agreement or any of its rights or remedies, in whole or in part, without the prior written consent of the City in each instance, which may be withheld by the City in its sole discretion. For purposes of this Agreement, any transfer by Operator of any interest in the License, or in itself, shall constitute an assignment of this Agreement requiring City approval. Any assignment attempted by Operator of its rights under this Agreement without City’s prior written consent shall be void ab initio.
9. General Provisions.
9.1 Attorneys’ Fees. If any action at law or in equity is brought to enforce, defend or interpret any provisions of this Agreement by any party hereto, the prevailing party shall be entitled to recover all reasonable costs and expenses relating thereto, including, without limitation, reasonable attorneys’ fees, in addition to any other relief to which that party may be entitled, subject to the limitations provided in Section 6.2 hereof.
9.2 Authority. Each party signing this agreement represents and warrants that he/she/it has full and legal power and authority to do so, without any further action or approval by any other party,
9.3 Entire Agreement; Amendment . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and any and all other verbal or written agreements with respect to same are hereby superseded. Any amendment hereto must be in writing and executed by all parties.
9.4 Further Assurances. The parties agree to perform such further acts and to execute such further documents and instruments as may be reasonably required in order to carry out the provisions of this Agreement and the intentions of the parties.
9.5 Inconsistency. The agreements, terms , and conditions contained in thi s Agreement are in addition to, not in lieu of, the terms and conditions contained in Applicable Local Law and any permit issued thereunder. To the extent of any inconsistency between the terms of this Agreement and Applicable Local Law or any permit issu ed thereunder, the terms of this Agreement shall govern.
9.6 Headings. The headings of the Sections hereof are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
9.7 Notice. Any and all not ices pertaining to this Agreement shall be in writing and delivered to the parties hereto by personal delivery via courier service or express mail, or by certified mail, postage pre -paid, at the addresses set forth above. All notices shall be deemed given: (a) if sent by certified mail, three days after deposited in the mail, certified and postage pre-paid; and (b) if delivered by hand, courier service, or express mail, when delivered. Notices shall be addressed to the parties as follows:
If to Operator:
Masis A. Kevorkian
7727 Herschel Ave.
La Jolla, CA 92037
With a Copy To:
Heather U. Guerena
7727 Herschel Ave.
La Jolla, CA 92037
If to City of Chula Vista:
City of Chula Vista
Attn: City Manager
276 Fourth Avenue
Chula Vista, CA 91910
With a copy to:
City Attorney
276 Fourth Avenue
Chula Vista, CA 91910
9.8 No Waiver . A failure by the City to strictly enforce its rights hereunder this Agreement in any instance shall not be deemed to be a waiver of any rights hereunder. No delay in exercising any right, power or privilege hereunder or under any applicable law or contract shall operate as a waiver thereof. No waiver shall affect any default other than the default specified in the waiver, and said waiver, and sai d waiver shall be operative as to the time and only to the extent therein stated.
9.9 No Partnership or Joint Venture . Nothing contained herein or inferred herein shall be deemed or construed to create any partnership, joint venture, or other association by or between City and Operator. Neither City nor any agent of the City at any time has agreed or consented to direct or participate in any of the investments, business dealings, planning, or operation of Operator in any capacity.
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
9.10 Time of Essence. Time is of the essence of this Agreement and each of the covenants or conditions that is to be performed at a particular time or within a particular time.
9.11 Counterparts and Electronic Signatures. This Agreement may be executed in multiple counterparts, which together shall constitute one full and final agreement. Each party agrees that the electronic signatures, whether digital or encrypted, of the parties included in this Amendment are intended to authenticate this writing and to have the same force and effect as manual signatures. Electronic Signature means any electronic sound, symbol, or process attached to or logically associated with a record and executed and adopted by a party with the intent to sign such record, including facsimile or email electronic signatures, pursuant to the California Uniform Electronic Transactions Act (Cal. Civ. Code §§ 1633.1 to 1633.17) as amended from time to time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
CITY: OPERATOR:
City of Chula Vista Stones South Bay Corp
________________________________ By: ________________________ Maria V. Kachadoorian, Ryan E. Stone,
City Manager President
Approved as to Form:
______________________ By: ______________________
Marco A. Verdugo Heather U. Guerena
City Attorney Vice President and General Counsel
City of Chula Vista Agreement No.: 2025-069
Operator Name: Stones South Bay Corp.
ACKNOWLEDGEMENT AND AGREEMENT BY HOLDERS OF FINANCIAL
INTERESTS IN THE LICENSE HELD BY OPERATOR
For purposes of this Agreement, as of the Effective Date, the undersigned each acknowledge and agree as follows:
(a) Under the terms of Applicable Local Law, it/he/she is a holder of a financial interest in the License owned by Operator pursuant to which Operator plans to operate a card room facility at 271 and 285 Bay Boulevard, Chula Vista, California.
(b) As a necessary inducement for City to enter into this Agreement, it/he/she, agrees to abide by any and all provisions of Applicable Local Law, and acknowledges and agrees that each and every provision of Applicable Local Law is valid and enforceable by the City with respect thereto. (c) In the event Operator proposes to assign its rights under the Agreement to one or more of the undersigned, and City approves su ch assignment in its sole discretion, it/he/she will be fully bound, jointly and severally, by each and every provision of the Agreement.
UPDATED INFORMATION AND SIGNATURE LINES TO BE INSERTED