Exhibit (e)(6)
INDEMNIFICATION AGREEMENT
June 17, 2002
The Genesee Company
The Fortress Group, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
XxXxxx, XX 00000
Dear Sirs:
This Indemnification Agreement is being written to induce Lennar Corporation
and FG Acquisition Corporation to enter into, and carry out the transactions
contemplated by, a Securities Purchase Agreement dated June 17, 2002 among FG
Acquisition Corporation, Lennar Corporation, Prometheus Home Builders LLC and
Xxxxxx Xxxxx and a Plan and Agreement of Merger dated June 17, 2002 among The
Fortress Group, Inc., Lennar Corporation and FG Acquisition Corporation.
GCH, Inc. ("Custom"), which formerly was named Genessee Custom Homes, Inc.,
purchased from The Genessee Company (the "Company") certain assets making up
the Company's custom home division under the terms of an Asset Purchase
Agreement (the "Asset Purchase Agreement") dated July 1, 1996, between the
Company and Custom.
The Genesee Company ("Company") is a defendant in two lawsuits (the "Lawsuits")
in the Colorado state courts captioned Xxxx and Xxxxxxx Xxxxx v. The Genesee
Company (the "Xxxxx Case") and Xxxxx and Xxxxx Xxxx v. The Genesee Company (the
"Xxxx Case"), relating, among other things, to alleged defects in the
construction of homes purchased from Custom.
The residence that is the subject of the Xxxxx Case was constructed by the
Company prior to July 1, 1996 and purchased by Custom from Genesee under the
terms of the Asset Purchase Agreement. The residence that is the subject of the
Xxxx Case was constructed by Custom on an unimproved lot purchased by Custom
from Genesee under the Asset Purchase Agreement.
At the present time, insurers for the Company and Custom are providing counsel
for the Xxxxx Case and the Xxxx Case, but have provided notices that the claims
may not be covered by insurance. A tentative agreement has been reached with
plaintiff's counsel in the Xxxx Case to dismiss the Company, without prejudice,
upon the Company's execution of a tolling agreement.
Under Section 4.3 of the Asset Purchase Agreement, Custom agreed to be
responsible for "all warranty claims arising out of custom homes finished and
delivered since January 1, 1996." Although Section 4.3 of the Asset Purchase
Agreement is not applicable to the Xxxx Case and may, or may not, be applicable
to the claims in the Xxxxx Case, Lennar Corporation and FG Acquisition
Corporation have requested that Custom accept responsibility, as between the
Company and Custom, for the Lawsuits.
As the builder and seller of the residence in the Xxxx Case, Custom
acknowledges that it is solely responsible, as between the Company and Custom,
for the defense costs and payment of any successful claims in the Xxxx Case.
Furthermore, as the seller of the residence in the Xxxxx Case, Custom
acknowledges that (notwithstanding the limitations of Section 4.3 of the Asset
Purchase Agreement), it will be responsible, as between the Company and Custom,
for the defense costs and payment of any successful claims in the Xxxxx Case.
In connection therewith, Custom agrees as follows:
1. If the Company, or any of The Fortress Group, Inc. or any of its
subsidiaries (each a "Fortress Company") which is, or becomes, a defendant in
either of both of the Lawsuits, seeks to have either of the Lawsuits dismissed
as to it on the ground that Custom is responsible for any liability relating to
defects in the home which is the subject of the Lawsuit, (i) Custom will
acknowledge, in such form as counsel for Company or the Fortress Company may
reasonably request, that, if there are any defects in the home which is the
subject of the Lawsuit for which the plaintiff is entitled to recover damages,
as among Custom, Company and the other Fortress Companies, Custom is
responsible for any costs or liabilities relating to that defect and (ii) if
Custom is not already a defendant in the Lawsuit, Custom will permit itself to
be substituted for Company and any other Fortress Companies which are
defendants in the Lawsuit.
2. Custom will indemnify Company and each other Fortress Company against, and
will hold each of them harmless from, any costs, expenses or liabilities
(including legal fees) which Company or any other Fortress Company may incur
because of, or in defending, either of the Lawsuits.
Nothing in this letter shall prejudice the rights of or affect, in any way, any
insurance carrier providing coverage in either the Xxxxx Case or the Xxxx Case.
In addition, Custom's indemnification obligations will only arise to the extent
the costs of defense and the claims are not covered by insurance.
As a condition to Custom's indemnification obligations in this letter, the
Company shall: (a) execute a tolling agreement in the Xxxx Case and such other
documents as reasonably are required to cause the plaintiff to dismiss the
Company from the Lawsuit, and (b) cooperate with Custom as reasonably requested
in defense of the Xxxxx Case and the Xxxx Case.
Very truly yours,
GCH, INC. (formerly Genesee Custom Homes,
Inc.), a Colorado corporation
By: /s/ Xxxxxx X. Short
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Xxxxxx X. Short, President
