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Exhibit 10.2
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
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hereto, and (ii) amounts owing under the lease for the property
in the 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.
s (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
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