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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 Collate
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