Environmental Indemnity

EXHIBIT 10.2


ENVIRONMENTAL INDEMNITY


THIS ENVIRONMENTAL INDEMNITY (this "Indemnity") is entered into as of May 30, 1995, jointly and severally by CIRCUS CIRCUS ENTERPRISES, INC., a Nevada corporation, and ELDORADO HOTEL ASSOCIATES LIMITED PARTNERSHIP, a Nevada limited partnership ("Eldorado"), (each an "Indemnitor," and collectively, the "Indemnitors"), to and for the benefit of Agent and Lenders (each as defined below), and each of their respective successors and permitted assigns, and their respective parent, subsidiary and affiliated corporations, and the respective directors, officers, agents, attorneys, and employees of each of the foregoing (each of which shall be referred to hereinafter individually as an "Indemnitee" and collectively as the "Indemnitees"). As used herein, "Agent" means FIRST INTERSTATE BANK OF NEVADA, N.A., acting in its capacity as agent for and representative of the Lenders, and any successor in that capacity, and "Lenders" means the Persons identified as "Lenders" and listed on the signature pages of the Credit Agreement, as defined below, together with their successors and permitted assigns.


RECITALS


A. Lenders have agreed to make certain Loans to CIRCUS AND ELDORADO JOINT VENTURE, a Nevada general partnership ("Partnership") pursuant to that certain Credit Agreement (as it may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement") of even date herewith by and among Agent, as arranger and administrative agent, Partnership, Lenders, and First Interstate Bank of Nevada, N.A., The Long-Term Credit Bank of Japan, Ltd., Los Angeles Agency, and Societe Generale, collectively, as managing agents ("Managing Agents") and Bank of America, N.T. & S.A., CIBC Inc. and Credit Lyonnais, Los Angeles Branch, collectively, as co-agents ("Co-Agents") which Loans are to be secured by, among other things, that certain Deed of Trust, Fixture Filing and Security Agreement with Assignment of Rents, dated as of even date herewith (the "Deed of Trust") executed by Partnership, as trustor, to First American Title Company of Nevada, as trustee, in favor of Agent, as beneficiary, which Deed of Trust encumbers, among other things that certain real property described on Exhibit A attached hereto (the "Premises"), and the Improvements thereon, whether now existing or hereafter constructed.


B. It is a condition of Lenders making the Loans that this Indemnity be executed and delivered by Indemnitor. Lenders are making the Loans in reliance upon this Indemnity.


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NOW, THEREFORE, based upon the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Lenders, Managing Agents, Co-Agents and Agent to enter into the Credit Agreement and to make the Loans thereunder, Indemnitors jointly and severally agree as follows:


1. Each capitalized term which is used herein but which is not defined herein shall have the meaning given to that term in the Credit Agreement. As used in this Indemnity:


"Agreed Rate" means a rate per annum equal to the sum of two percent
(2%) plus the Base Rate, such rate to change as and when the Base Rate
changes.


"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (42 U.S.C. (S)(S) 9601 et seq.), as heretofore or
-- ---
hereafter amended from time to time.


"Environmental Losses" means Losses suffered or incurred by any
Indemnitee, arising out of or as a result of: (i) any Hazardous Material
Activity that occurs, or is alleged by any governmental agency or any
claimant other than an Indemnitee to have occurred, in whole or in part, on
or prior to the Transfer Date; (ii) any violation on or prior to the
Transfer Date of any applicable Environmental Laws relating to the Premises
or other portion of the Project or to the ownership, use, occupancy or
operation thereof; (iii) any investigation, inquiry, order, hearing,
action, or other proceeding by or before any governmental agency in
connection with any Hazardous Material Activity that occurs, or is alleged,
by any governmental agency or any claimant other than an Indemnitee to have
occurred, in whole or in part, on or prior to the Transfer Date; (iv) any
breach of any covenant of the Partnership set forth in Section 6.7
(Environmental Disclosure and Inspection) or Section 6.8 (Partnership's
Remedial Action Regarding Hazardous Materials) of the Credit Agreement; (v)
the existence, prior to the Transfer Date, in the aquifer underlying the
Premises and other portions of Reno, Nevada, or in soils affecting that
aquifer, of PCE (tetrachloroethylene) and hydrocarbons, or either of them,
insofar as the Losses arise out of or otherwise relate (whether physically
or economically) to the Premises or other portion of the Project; or (vi)
any claim, demand or cause of action, or any action or other proceeding,
whether meritorious or not, brought or asserted against any Indemnitee that
directly or indirectly relates to, arises from or is based on any of the
matters described in clauses (i), (ii), (iii), (iv) or (v) of this
definition or any allegation by any governmental agency or any claimant
other than an Indemnitee of any such matters. Environmental Losses shall
include Losses suffered or incurred by an Indemnitee after the Transfer
Date that would not have been incurred or


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suffered but for any matter described in clause (i), (ii), (iii), (iv) or (v) of this definition that commenced prior to the Transfer Date or any allegation by any governmental agency or any claimant other than an Indemnitee of any such matters, including, but not limited to, Environmental Losses incurred by any Indemnitee arising out of or as a result of (x) the introduction or release of a Hazardous Material that is discovered or released at the Premises or any portion thereof after the Transfer Date but that was introduced at the Premises prior to the Transfer Date, or (y) the continuing migration onto, on or from the Premises, or the release on or at the Premises, of any Hazardous Material introduced in, on or under the Premises or the surrounding streets and sidewalks prior to the Transfer Date.


"Hazardous Material Activity" means any actual, proposed or threatened use, storage, holding, existence, release (including any spilling, leaking, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and the continuing migration into or through soil, surface water, or groundwater), emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation to or from the Premises or other portion of the Project of any Hazardous Material from, under, in, into or on the Premises or other portion of the Project (including, but not limited to, the surrounding streets and sidewalks), including, without limitation, the movement or migration of any Hazardous Material from surrounding property or groundwater in, into or onto the Premises or other portion of the Project and any residual Hazardous Material contamination on or under the Premises or other portion of the Project.


"Losses" means any and all costs and expenses actually incurred required to comply with (and, in the case of investigation and response costs, costs necessary to assure compliance with) applicable Environmental Laws and other governmental requirements (including, without limitation, reasonable attorneys' fees and disbursements) but only to the extent such costs and expenses reasonably were required for such compliance; provided that Losses shall not
------------- include: (i) with respect to any particular Indemnitee and loss, that portion, if any, of that loss which was caused by the gross negligence or wilful misconduct Of (including any wilful violation of any Environmental Law by) that Indemnitee, and (ii) any special assessments made by any special assessment district formed pursuant to Nevada law for the purpose of investigating and remediating pollution of the groundwater aquifer underlying downtown Reno, Nevada, which become a lien on the Premises after foreclosure of the lien of the Deed of Trust by or for the benefit of the Lenders, and (iii) any damages measured by the diminution in the value of the Premises caused by any Hazardous Material Activity (it being expressly understood and agreed, however, that this exclusion shall not affect the obligation of Indemnitors to compensate Indemnitees for actual damages


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reasonably incurred by them in complying with Environmental Laws except as
otherwise provided in clause (ii) above), and (iv) costs and expenses
incurred by any Indemnitee after indefeasible payment in full, in lawful
money of the United States, of the Loans and all other monetary Obligations
then due under the Loan Documents, expiration or cancellation of all
Letters of Credit and termination of the Commitments (it being expressly
understood and agreed that this clause (iv) shall not apply if foreclosure
of the lien of the Deed of Trust occurs).


"Transfer Date" means the later of: (i) the date on which any of
Lenders (or any of their affiliates) acquires, directly or through Agent,
fee title to the Premises and Improvements pursuant to the power of sale or
judicial foreclosure of the lien of the Deed of Trust, or by acceptance of
a deed in lieu of such foreclosure, and all redemption rights that
Partnership may have with respect thereto have expired, and (ii) the date
on which a period of ninety-one (91) days has elapsed since the date on
which fee title thereto has vested in any of Lenders or Agent (or any
affiliate thereof) and, during such period, no bankruptcy or other
insolvency proceeding has been filed by or against Partnership. If
Partnership should remain in possession of the Project after the Transfer
Date, or if Partnership should engage in any Hazardous Material Activity on
or at the Premises or other portion of the Project after the Transfer Date,
the Transfer Date shall be deemed to be the date after which Partnership is
no longer in possession of the Premises or other portion of the Project and
has ceased to engage in any Hazardous Material Activity on or at the
Premises or other portion of the Project (it being expressly understood and
agreed, however, that, solely for purposes of this definition, the presence
of any Hazardous Material on the Premises or other portion of the Project
after the Transfer Date, or the migration of such Hazardous Material
thereon, in either instance without the active involvement of Partnership
(whether directly or through any agent or contractor of Partnership) shall
not be deemed or construed to be engaging in any Hazardous Material
Activity on or at the Premises or other portion of the Project after the
Transfer Date).


2. Indemnitors jointly and severally hereby agree to indemnify, defend, and hold harmless Indemnitees, and each of them, from and against any and all Environmental Losses.


3. (a) Indemnitee shall notify Indemnitors of any claim or notice of the commencement of any action, administrative or legal proceeding or investigation as to which the indemnity provided for in Section 2 applies, within a reasonable period of time after such claim, action, proceeding or investigation becomes known to Indemnitee (it being expressly understood and agreed, however, that no such notice shall be required to an Indemnitor if the claim, action, proceeding or investigation has already become known to such Indemnitor prior to or during that


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period). Indemnitors shall assume on behalf of such Indemnitee and conduct with due diligence and in good faith the investigation and defense of such claim, action, proceeding or investigation and the response thereto with counsel reasonably satisfactory to Agent; provided, however, that such Indemnitee shall
-------- ------- have the right to be represented by advisory counsel of its own selection and at its own expense; and provided, further, that if any such claim, action,
-------- ------- proceeding, or investigation involves both an Indemnitor and an Indemnitee, and such Indemnitee shall have reasonably concluded that there may be legal defenses available to it that are different from, additional to, or inconsistent with those available to such Indemnitor, or that such Indemnitor is not adequately investigating or defending such matter on behalf of Indemnitee, then the Indemnitee shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, action, proceeding or investigation on its own behalf at Indemnitors' expense. In addition to the foregoing, after foreclosure of the lien of the Deed of Trust by or on behalf of Lenders, Indemnitee shall notify Indemnitors of Hazardous Material Activity not previously known to Indemnitors and which may be the basis for a claim by Indemnitee against Indemnitors hereunder within a reasonable period of time after such newly discovered Hazardous Material Activity becomes known to Indemnitee.


(b) If any claim, action, proceeding, or investigation arises as to which the indemnity provided for in Section 2 applies, and Indemnitors fail to assume promptly (and in any event within fifteen (15) days after being notified of the claim, action, proceeding, or investigation) the defense of an Indemnitee, then such Indemnitee may contest and settle the claim, action, proceeding, or investigation at Indemnitors' expense using counsel selected by such Indemnitee; provided, however, that after any such failure by Indemnitors
-------- ------- no such contest need be made by such Indemnitee and settlement or full payment of any claim may be made by such Indemnitee without Indemnitors' consent and without releasing any of the Indemnitors from any obligations to such Indemnitee under Section 2.


4. This Indemnity is given solely to protect Lenders and the other Indemnitees against Environmental Losses, and not as additional security for, or as a means of repayment of, the Loans. The obligations of Indemnitors under this Indemnity are independent of, and shall not be measured or affected by (i) any amounts at any time owing under the Loans or secured by the Deed of Trust, (ii) the sufficiency or insufficiency of any collateral (including, without limitation, the Premises) given to Lenders to secure repayment of the Loans, (iii) the consideration given by Lenders or any other Person in order to acquire the Project or any portion thereof, (iv) the modification, expiration or termination of the Deed of Trust or any other document or instrument relating to the Loans, or (v) except as otherwise expressly provided herein, the discharge or repayment in full of the Loans (including, without limitation, by amounts paid or credit bid at a foreclosure sale or by discharge in connection with a deed in lieu of foreclosure).


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5. Indemnitors' obligations hereunder shall survive the sale or other transfer of the Project or any portion thereof prior to the Transfer Date, and shall remain in force beyond (i) the expiration of any statute of limitations and (ii) payment or satisfaction in full of any single claim within the scope of this Indemnity. The rights of each Indemnitee under this Indemnity shall be in addition to any other rights and remedies of such Indemnitee against Indemnitors or any of them under any other document or instrument now or hereafter executed by Partnership, any of the Indemnitors or any Affiliate thereof, or at law or in equity (including, without limitation, any right of reimbursement or contribution pursuant to CERCLA), and shall not in any way be deemed a waiver of any of such rights. Each Indemnitor agrees that it shall have no right of contribution (including, without limitation, any right of contribution under CERCLA) against any Indemnitee with respect to any matter covered by this Indemnification, and hereby waives and relinquishes any such right excepting, however, any right of contribution which such Indemnitor m ...