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EXHIBIT 2.5
ASSUMPTION OF OBLIGATIONS AND PLEDGE AGREEMENT
(VIDEO CATALOG)
This Assumption of Obligations and Pledge Agreement (this
"AGREEMENT")
is made and entered into as of March 21,
2005, by and between Genius Products,
Inc., a Delaware corporation ("PLEDGEE"),
and American Vantage Companies, a
Nevada corporation ("PLEDGOR").
WHEREAS, Pledgee and Pledgor are parties to that certain Agreement
and
Plan of Merger dated as of March 21, 2005
(the "MERGER AGREEMENT"), pursuant to
which Pledgee will acquire the Company (as
defined in the Merger Agreement);
WHEREAS, as a further inducement to Pledgee to enter into and
consummate the transactions contemplated by
the Merger Agreement, Pledgee
desires to assign, and Pledgor desires to
assume, certain obligations of the
Company, on a going-forward basis,
following the consummation of the
transactions contemplated by the Merger
Agreement; and
WHEREAS, the execution and delivery of this Agreement by the
parties
hereto is a condition to the closing of the
transactions contemplated by the
Merger Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual
covenants contained herein, and for other
good and valuable consideration, the
receipt, adequacy and legal sufficiency of
which are hereby acknowledged, the
parties do hereby agree as follows:
1. CAPITALIZED TERMS. Capitalized terms used but not defined
herein
shall have the meanings for such terms that
are set forth in the Merger
Agreement.
2. CERTAIN DEFINITIONS.
(a) "ASSIGNMENT" has the meaning set forth in SECTION 3
hereof.
(b) "CERTIFICATES" means the certificate or certificates
evidencing ownership of the Collateral, in
such denominations as Pledgor shall
reasonably request.
(c) "COLLATERAL" means seven hundred thousand (700,000) shares
of Purchaser Common Stock registered in the
name of Pledgor and/or its
Affiliates, which comprises a portion of
the Merger Consideration, to the extent
not released and distributed by Pledgee to
Pledgor in accordance with SECTION
10(b) hereof.
(d) "DEFAULT" has the meaning set forth in SECTION 8 hereof.
(e) "OBLIGATIONS" has the meaning set forth in SECTION 3(A)
hereof.
3. ASSIGNMENT, ASSUMPTION AND OTHER AGREEMENTS.
(a) Effective as of immediately following the Effective Time,
Pledgee hereby assigns, sells, transfers
and sets over (collectively, the
"ASSIGNMENT") to Pledgor the Pledgee's
obligations and liabilities related to or
associated with (i) accounts payable that
are attributable to the Direct
Response Video Catalog of Wellspring Media
that are set forth on SCHEDULE 1
attached hereto, and (ii) amounts owing
under the lease for the property in the
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name of Wellspring Media at 5900 Wilshire
Blvd., Los Angeles, CA (the "WILSHIRE
BLVD. PREMISES"), in all cases without
set-off or counterclaims against Pledgee
(collectively, the "OBLIGATIONS"). Pledgor
hereby accepts the Assignment and
assumes and agrees to pay and discharge all
of the Obligations when due from and
after the Closing. In addition to any
remedies available to Pledgee under
SECTION 9 hereof, in the event that Pledgor
fails to pay any Obligation when it
becomes due, and Pledgee shall pay such
amount on behalf of Pledgor, then
Pledgor shall pay the amount of such
Obligation to Pledgee with such amount
carrying interest at a rate of 10.0% per
annum from the due date for such
Obligation until such amount plus accrued
interest is paid in full to Pledgee
(with any such accrued interest also
constituting an Obligation hereunder).
(b) Pledgee agrees to vacate the Wilshire Blvd. Premises
within 15 days following the sale or
shutdown of the Video Catalog business
conducted at that location, and will
reasonably cooperate with Pledgor in
subletting or assigning the Wilshire Blvd.
Premises thereafter.
(c) Pledgor agrees, following the Effective Time, to segregate
and deposit 50% of the net proceeds
actually received by Pledgor or its
Affiliates from the sale of Merger
Consideration, until such time as $1,100,000
of proceeds is actually deposited by
Pledgor (which shall be no later than 60
days following the Effective Time), into a
joint bank account with Pledgee,
which account will require the signatures
of both Pledgee and Pledgor to make
withdrawals or transfers. The parties agree
to promptly use such funds for the
payment of Obligations and Pledgor's other
obligations hereunder until they are
fully satisfied, after which time the
remaining funds, if any, will promptly be
released back to Pledgor.
(d) Pledgor agrees to pay to Pledgee one-half of any reduction
in amounts legally owing under any
individual Obligation resulting primarily
from the negotiation or efforts of Pledgee
with the creditor, within five days
of receipt of written notice by Pledgor
accompanied by reasonable proof or other
documentation evidencing the subject
creditor's unconditional agreement to such
reduction. For example, if Pledgee obtains
a settlement with a creditor of an
Obligation legally reducing the amount owed
to such creditor from $20,000 to
$10,000, Pledgor will pay to Pledgee $5,000
within five days of receipt of such
notice and proof or documentation of such
reduction.
4. PLEDGE AND SECURITY INTEREST. To secure Pledgor's obligations
to
Pledgee to assume and fully discharge when
due all of the Obligations and
Pledgor's other obligations hereunder,
Pledgor hereby pledges the Collateral to
Pledgee and grants to Pledgee a continuing
security interest in the Collateral.
5. DEPOSIT OF COLLATERAL. Pledgor shall (i) deliver to Pledgee
the
Certificates; and (ii) deliver to Pledgee
one original stock power for each
Certificate in the form of EXHIBIT A
attached hereto, duly executed in blank.
6. WARRANTIES AND COVENANTS OF PLEDGOR.
Pledgor represents, warrants, covenants and agrees as follows:
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(a) OBLIGATIONS. SCHEDULE 1 attached hereto sets forth a true,
correct and accurate listing of all
obligations and liabilities related to or
associated with accounts payable that are
attributable to the Direct Response
Video Catalog of Wellspring Media.
(b) NOVATIONS. Pledgor shall use its best efforts to seek
novations of all of the Obligations such
that Pledgor is the obligor of record
with respect to all of the Obligations.
Notwithstanding anything herein or in
the Merger Agreement to the contrary and
for the avoidance of doubt, upon and
following the Assignment, Pledgor shall be
the primary obligor with respect to
all of the Obligations.
(c) OWNERSHIP OF COLLATERAL. Pledgor has good, valid
marketable title to the Collateral, free
from any liens, charges, pledges,
security interests, encumbrances, rights to
purchase or other claim or interest
of any kind, other than those granted
herein.
(d) LIENS. Pledgor will neither create nor permit the creation
of any lien charge, pledge, security
interest, encumbrance or other claim or
interest in the Collateral without the
prior written consent of Pledgee.
(e) FIRST-PRIORITY SECURITY INTEREST. Pledgee will at all
times have a valid, perfected
first-priority security interest in the
Collateral.
(f) TRANSFERS. Pledgor will neither make nor permit any
transfer of the Collateral without the
prior written consent of Pledgee.
(g) REIMBURSEMENT OF EXPENSES. Pledgor will reimburse Pledgee
for any expenses reasonably incurred by
Pledgee in protecting or realizing on
the Collater
