EXHIBIT 2.4
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "AGREEMENT") is made and entered into as of
March 21, 2005, by and among GENIUS PRODUCTS, INC., a Delaware corporation
("PURCHASER"), AMERICAN VANTAGE COMPANIES, a Nevada corporation ("SELLER"), and
CITY NATIONAL BANK, national association (the "ESCROW AGENT"). Purchaser and
Seller are sometimes collectively referred to herein as the "PARTIES" and
individually as a "PARTY." Capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Merger Agreement (as defined
below).
W I T N E S S E T H:
WHEREAS, Purchaser and Seller, along with subsidiaries of the parties,
have entered into that certain Agreement and Plan of Merger, dated as of March
21, 2005 (the "MERGER AGREEMENT"), pursuant to which Purchaser has agreed to
acquire American Vantage Media Corporation and its subsidiaries.
WHEREAS, pursuant to the Merger Agreement and as part of the
transactions contemplated thereby, the Parties have agreed to enter into this
Agreement and deposit the Escrowed Shares (consisting of 600,000 shares of
Purchaser Common Stock) with the Escrow Agent;
WHEREAS, the parties hereto desire to more specifically set forth their
rights and obligations with respect to the Escrowed Shares and the distribution
and release thereof; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the Parties' obligations under the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. ESTABLISHMENT OF ESCROW.
Simultaneously with the execution of this Agreement, the following has
occurred, all of which is hereby acknowledged by each of the Parties and the
Escrow Agent:
1.1 DEPOSIT OF ESCROWED SHARES.
Purchaser has issued certificates (the "STOCK CERTIFICATES") for the
Escrowed Shares issuable by Purchaser pursuant to Section 1.4 of the Merger
Agreement in the name of Seller evidencing the shares of Purchaser Common Stock
to be held in escrow in accordance with this Agreement and Purchaser has
delivered to the Escrow Agent duly executed in blank stock powers (the "STOCK
POWERS") with respect to such Stock Certificates. The Stock Certificates and
Stock Powers shall be held by the Escrow Agent in the Escrow Account (as defined
below) in accordance with the provisions of this Agreement and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party hereto or Seller.
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1.2 ESCROW ACCOUNT.
The Escrow Agent has received the Stock Certificates and Stock Powers
and agrees to hold them in a separate and distinct account (the "ESCROW
ACCOUNT"), subject to the terms and conditions of this Agreement. The Escrow
Agent shall not distribute or release any of the Stock Certificates and Stock
Powers except in accordance with the express terms and conditions of this
Agreement.
1.3 ACKNOWLEDGEMENT OF INDEMNIFICATION OBLIGATIONS.
Seller has agreed to the terms of the Merger Agreement, including,
without limitation, the indemnification provisions contained in Article 9
thereof which provide that the Purchaser shall be held harmless and indemnified
from and against, and shall be compensated and reimbursed for, any Purchaser
Damages incurred, pursuant to the terms of such Article. The Seller, and the
Escrow Agent on behalf of Seller, expressly agree that, of the 600,000 Escrowed
Shares, (a) 350,000 shares shall be security generally for the indemnification
provisions of the Merger Agreement (the "GENERAL ESCROW"), and (b) 250,000
shares shall be security specifically for any Purchaser Damages determined in
accordance with the last sentence of Section 9.2 of the Merger Agreement
(relating to Section 2.5(f) of the Merger Agreement) (the "SPECIFIC ESCROW"),
subject in all cases to the limitations and in the manner provided for in this
Agreement. The Stock Certificates and Stock Powers will be subject to release to
Seller or Purchaser upon the terms set forth herein.
1.4 VOTING OF ESCROWED SHARES.
For so long as any Escrowed Shares remain in the Escrow Account, the
Seller hereby covenants and agrees, (i) to be present in person or represented
by proxy at all stockholder meetings of Purchaser so that all Escrowed Shares
then beneficially owned by such Seller shall be counted for the purpose of
determining the presence of a quorum at such meetings, and (ii) to vote, or act
by consent with respect to, all Escrowed Shares evidenced by the Stock
Certificates then held by the Escrow Agent pursuant to this Agreement, in
accordance with the Resale and Voting Agreement.
1.5 DIVIDENDS, ETC.
Any cash, securities or other property distributable (whether by way of
dividend, stock split or otherwise) in respect of or in exchange for any
Escrowed Shares shall not be distributed to Seller, but rather shall be
deposited by Purchaser with the Escrow Agent to be held in the Escrow Account.
At the time any Escrowed Shares are required to be released from the Escrow
Account to any Person pursuant to this Escrow Agreement, any cash, securities or
other property previously distributed in respect of or in exchange for such
Escrowed Shares shall be released from the Escrow Account to such Person.
1.6 TRANSFERABILITY.
The interests of Seller in the Escrow Account and in the Escrowed
Shares shall not be assignable or transferable, other than by operation of law.
No transfer of any of such interests by operation of law shall be recognized or
given effect until Purchaser shall have received written notice of such
transfer.
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1.7 FRACTIONAL SHARES.
No fractional shares of Purchaser Common Stock shall be retained in or
released from the Escrow Account pursuant to this Escrow Agreement. In
connection with any release of Escrowed Shares from the Escrow Account, any
Person who would otherwise be entitled to receive a fraction of a share of
Purchaser Common Stock (after aggregating all fractional shares of Purchaser
Common Stock issuable to such Seller) shall be paid by Purchaser in cash, the
dollar amount (rounded to the nearest whole cent), without interest, determined
by multiplying such fraction by the average closing price for the five trading
days immediately preceding the date of such release, and such fraction of a
share shall be returned to Purchaser.
1.8 VALUATION OF SHARES HELD IN ESCROW.
For purposes of this Escrow Agreement, "FACE VALUE" means $1.56 per
share.
1.9 SCOPE OF POWERS, DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
Subject to the Parties' directions, the Escrow Agent has whatever
powers are conferred by law and which are required to discharge its obligations
and exercise its rights under this Escrow Agreement, including but not limited
to the powers specified in the Section 1.10 below, and the powers and authority
granted to the Escrow Agent under other provisions of this Escrow Agreement. The
Escrow Agent shall have no duties or obligations except those specifically set
forth in this Agreement.
1.10 POWERS EXERCISABLE BY THE ESCROW AGENT, SUBJECT TO THIS
AGREEMENT.
The Escrow Agent is authorized and empowered to exercise the following
powers, subject to the limitations contained in this Agreement:
(a) To register any investment held in the Escrow Account in
its own name or in the name of a nominee and to hold any investment in bearer
form. The books and records of the Escrow Agent shall show that all such
investments are part of the Escrow Account. The Escrow Agent shall be liable for
all acts of its nominee.
(b) To utilize registered securities depositories to hold
assets of the Escrow Account, provided however that the Escrow Agent shall not
be relieved of any fiduciary responsibility with respect to the assets so held.
(c) To employ agents, including public accountants and legal
counsel (which may be counsel for Parties), as it shall determine appropriate,
and to pay their reasonable expenses and compensation from the Escrow Account;
(d) To rely on Parties to defend and litigate, or settle, at
their expense, any suit brought against the Escrow Account or any order sought
to be satisfied out of the Escrow Account, without duty on the Escrow Agent
beyond forwarding related papers to Parties and complying with any final order
to the extent of the Escrow Account;
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(e) To withhold from taking any action until it receives
proper written notice of an occurrence of an event affecting the Escrow Account;
(f) To treat as genuine, sufficient and correct, in form,
execution and validity, and as the document it purports to be, and from the
party it purports to be from, any notice, instruction, letter, paper, telex or
other document purported to be furnished to Escrow Agent by Parties and believed
by Escrow Agent to be both genuine and to have been transmitted by the proper
party or parties, and Escrow Agent shall have no liability with respect to any
action taken or foregone by Escrow Agent in good faith in reliance on such
document;
(g) To be fully released and discharged from any obligation to
perform any further duties imposed upon it with respect to this Escrow following
its resignation or removal and the appointment of a successor or the deposit of
the Escrow Account under Section 3.3 below; and
(h) To be free from any liabilities or change in duties, other
than as may be specifically described elsewhere herein, for the action or
inaction of a party to this Escrow Agreement, or any other party, or the
occurrence or non-occurrence of an event outside of this Escrow.
1.11 NOTIFICATION OF RIGHTS REGARDING SECURITIES.
Following receipt of information, the Escrow Agent will notify the
Parties of any conversion, redemption, exchange, subscription or other right
relating to any securities purchased hereunder of which notice was given after
the acquisition of such securities by the Escrow Agent, and the Escrow Agent
shall have no obligation to exercise any such right unless it is instructed by
the Parties or their Representative in writing to exercise such right, within a
reasonable time prior to the expiration of such right.
1.12 SHAREHOLDER COMMUNICATIONS.
The Parties directs the Escrow Agent not to disclose to any company
requesting shareholder information the name and the address of the Parties or
the share position of the securities of the inquiring company in the Escrow
Fund.
1.13 ELECTRONIC AFFIRMATION.
Notwithstanding any other provision of this Article IV, the Escrow
Agent may settle securities trades effected by the Parties through a securities
depository that utilizes an institutional delivery system, in which event the
Escrow Agent may deliver or receive securities in accordance with appropriate
trade reports or statements given to the Escrow Agent by such depository without
having received direct communications or instructions from the Parties.
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1.14 ADDITIONAL INSTRUCTIONS.
In any matter under this Escrow Agreement in which the Escrow Agent is
permitted or required to act upon instructions, the Escrow Agent, where it deems
necessary, may request further instructions from the person or entity giving the
original instructions, or from the Parties, as the case may be, and may defer
any and all action pending receipt thereof.
2. RELEASE OF ESCROWED SHARES.
The Escrowed Shares are intended to provide a source of funds and
property for the satisfaction of certain amounts which may become payable to
Purchaser pursuant to Article 9 of the Merger Agreement prior to the General
Distribution Date or Specific Distribution Date (as such terms are defined
below) (in either case, a "DISTRIBUTION DATE"). The Escrowed Shares shall only
be distributed or released as follows:
2.1 INDEMNIFICATION CLAIMS.
At any time and from time to time prior to the applicable Distribution
Date, if Purchaser makes a claim for indemnification pursuant to and in
accordance with the provisions of Article 9 of the Merger Agreement (an
"INDEMNIFICATION CLAIM"), including provisions relating to the Threshold Amount,
Purchaser shall deliver to the Escrow Agent and Seller a written notice (an
"INDEMNIFICATION NOTICE") setting forth the amount of such claim (to the extent
the amount of such claim is known and quantifiable as of such date) and setting
forth in reasonable detail the nature and the basis for such claim. Purchaser
shall also deliver to the Escrow Agent written proof of delivery to Seller of a
copy of such Indemnification Notice (which proof may consist of a photocopy of
the facsimile transmission confirmation sheet, registered or certified mail or
overnight courier receipt or the signed receipt if delivered by hand). If the
Escrow Agent has not received a written objection to such Indemnification Claim
from Seller within twenty (20) days following the Escrow Agent's receipt of such
proof of delivery to Seller, then on the twenty-first (21st) day following such
receipt the Escrow Agent shall, in accordance with the provisions of Section 2.4
below, distribute from the Escrow Account to Purchaser Stock Certificates (along
with appropriate Stock Powers) evidencing Escrowed Shares having an aggregate
Face Value equal to the amount of such Indemnification Claim as specified in
writing by Purchaser. If such Indemnification Claim relates to Purchaser Damages
covered by the Specific Escrow (as determined under Section 1.3 above), then the
Escrowed Shares shall be first delivered out of the Specific Escrow.
2.2 DISPUTES.
If Seller delivers to the Escrow Agent and Purchaser a written
objection (a "DISPUTE NOTICE") to any Indemnification Claim or portion thereof
within twenty (20) days following the Escrow Agent's receipt of proof of
delivery of such Indemnification Notice, then, except as otherwise provided in
Section 2.3 below, the Escrow Agent shall not distribute to Purchaser Stock
Certificates evidencing the portion of the Escrowed Shares that is the subject
of the Dispute Notice until the Escrow Agent receives either (i) written
instructions signed by Seller and Purchaser authorizing the distribution to
Purchaser of the portion of the Escrowed Shares that is the subject of the
Dispute Notice and providing the Escrow Agent with indemnity reasonably
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satisfactory to the Escrow Agent against any liability, claims or damages
resulting from compliance by the Escrow Agent with such instructions, or (ii) a
final decision of a court of competent jurisdiction pursuant to the Merger
Agreement directing the distribution to Purchaser of Stock Certificates
evidencing the portion of the Escrowed Shares that is the subject of the Dispute
Notice. Upon receipt of such written instructions or final decision, as the case
may be, the Escrow Agent shall distribute to Purchaser Stock Certificates (along
with appropriate Stock Powers) evidencing the portion of the Escrowed Shares
subject to dispute in accordance with such written instructions or final
decision. In the event that Seller is the prevailing party in whole or in part
in connection with any such dispute, Stock Certificates (along with appropriate
Stock Powers) evidencing the portion of the Escrowed Shares that was the subject
of such Dispute Notice and that is not distributed to Purchaser as provided in
the immediately preceding sentence shall remain in the Escrow Account and shall
be available to satisfy subsequent Indemnification Claims until released as
provided in Section 2.5 below. Any Dispute Notice shall describe in reasonable
detail the basis for any objection to the matters set forth in the
Indemnification Notice and the portion of such Indemnification Claim (if less
than all) which is the subject of such Dispute Notice.
2.3 PARTIAL DISTRIBUTION.
If any Dispute Notice includes an objection to only a portion of an
Indemnification Claim, the Escrow Agent shall promptly distribute to Purchaser
from the Escrow Account Stock Certificates (along with appropriate Stock Powers)
evidencing Escrowed Shares having an aggregate Face Value equal to that portion
of the Indemnification Claim for which there is no objection, as specified in
writing by Purchaser; PROVIDED, that no such partial release by the Escrow Agent
shall terminate or otherwise prejudice any rights of Purchaser with respect to
amounts claimed in any Indemnification Notice which are in excess of the amounts
so released.
2.4 MANNER OF DISTRIBUTIONS.
All distributions of Stock Certificates evidencing Escrowed Shares
shall be made as set forth in this Article 2. Distributions of Stock
Certificates evidencing the Escrowed Shares shall be made to an account or
accounts designated in writing by Seller or Purchaser, as applicable.
2.5 RELEASE OF REMAINING ESCROWED SHARES.
(a) On the earlier to occur of sixty (60) days after delivery
by Purchaser's auditor of an audit report covering Purchaser's fiscal year which
includes the Closing Date or April 30, 2006 (the "GENERAL DISTRIBUTION Date"),
the Escrow Agent shall release to Seller Stock Certificates (along with
appropriate Stock Powers) evidencing the amount of shares in the General Escrow
(if any) as of the General Distribution Date, less all Unresolved Claims.
(b) On the date which is ninety (90) days after the Effective
Date (the "SPECIFIC DISTRIBUTION DATE"), the Escrow Agent shall release to
Seller Stock Certificates (along with appropriate Stock Powers) evidencing the
amount of shares in the Specific Escrow (if any) as of the Specific Distribution
Date, less all Unresolved Claims.
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(c) For purposes of this Agreement, the term "UNRESOLVED
CLAIMS" shall mean, as of the applicable Distribution Date, the aggregate amount
of all Indemnification Claims made in accordance with Section 1.3 above that are
the subject of a Dispute Notice or that are otherwise unsatisfied, including any
Indemnification Claims for which an Indemnification Notice has been delivered
but for which the twenty (20)-day objection period has not expired as of such
date.
(d) Promptly upon the Escrow Agent's receipt of a final
determination in writing of Seller and Purchaser or a final determination of a
court of competent jurisdiction, as the case may be, of any Unresolved Claims
that are the subject of a Dispute Notice or upon the expiration of the twenty
(20)-day objection period for any Unresolved Claim for which no Dispute Notice
has been delivered, the Escrow Agent shall distribute to Purchaser Stock
Certificates (along with appropriate Stock Powers) evidencing such amount of
Escrowed Shares to be distributed to Purchaser pursuant to such final
determination or Escrowed Shares with an aggregate Face Value equal to the
amount of such Unresolved Claim for which no Dispute Notice has been delivered,
as the case may be, in each case in accordance with the provisions of Section
2.4 above. After the resolution of all Unresolved Claims pending as of the
Distribution Date, any remaining Stock Certificates evidencing Escrowed Shares
not distributed to Purchaser pursuant to the terms hereof shall be released
promptly thereafter by the Escrow Agent to Seller.
2.6 TERMINATION.
This Agreement shall terminate when the entire Escrowed Shares has been
released and distributed in accordance with this Article 2. Upon such
termination this Agreement shall have no further force and effect, except that
the provisions of this Section 2.6 and Articles 3, 4 and 5 and Articles 7
through 18 below shall survive such termination.
3. CONDITIONS TO ESCROW.
The Escrow Agent agrees to hold the Escrowed Shares and to perform in
accordance with the terms and provisions of this Agreement. The Parties agree
that the Escrow Agent shall not assume any responsibility for the failure of the
Parties to perform in accordance with the Merger Agreement or this Agreement.
The acceptance by the Escrow Agent of its responsibilities hereunder is subject
to the following terms and conditions which the Parties hereto agree shall
govern and control with respect to the Escrow Agent's rights, duties and
liabilities hereunder:
3.1 LIABILITY.
The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein, and no additional duties or obligations shall be
implied hereunder. In performing its duties under this Agreement, or upon the
claimed failure to perform any of its duties hereunder, the Escrow Agent shall
not be liable to anyone for any damages, losses or expenses which may be
incurred as a result of the Escrow Agent so acting or failing to so act;
PROVIDED, HOWEVER, that the Escrow Agent shall not be relieved from liability
for damages arising out of its proven gross negligence or willful misconduct
under this Agreement. The Escrow Agent shall in no event incur any liability
with respect to (i) any action taken or omitted to be taken in good faith upon
advice of legal counsel (which counsel may not also be counsel to any Party)
given with respect to any question relating to the duties and responsibilities
of the Escrow Agent hereunder or (ii) any action taken or omitted to be taken in
reliance upon any instrument delivered to the Escrow Agent and believed by it to
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be genuine and to have been signed or presented by the proper Party or Parties.
The Escrow Agent shall not be bound in any way by any agreement or contract
between or among the Parties, whether or not the Escrow Agent has knowledge of
any such agreement or contract, including, but not limited to, the Merger
Agreement. The Escrow Agent is not a party to, nor is it bound by, nor need it
give consideration to the terms or provisions of, any other agreement or
undertaking among the Parties or any of them, or between the Parties or any of
them and other persons (other than this Agreement), it being the intention of
the parties hereto that the Escrow Agent assent to and be obligated to give
consideration only to the terms and provisions hereof.
3.2 RIGHTS IN EVENT OF DISPUTE.
It is understood and agreed that, in the event of any dispute between
the Parties or among them or any other person resulting in adverse claims and
demands being made in connection with or for any money or other property
involved in or affected by this Agreement, the Escrow Agent shall refuse to
comply with such demands or claims, so long as such dispute shall continue. In
such event, the Escrow Agent shall make no distribution, release or other
disposition of the Stock Certificates evidencing the Escrowed Shares or any
portion of the Escrowed Shares. Anything herein to the contrary notwithstanding,
the Escrow Agent shall not be or become liable to such Parties or persons or any
of them for the failure of the Escrow Agent to comply with such conflicting or
adverse demands. The Escrow Agent shall be entitled to continue to refrain and
refuse to distribute, release or otherwise dispose of the Stock Certificates
evidencing the Escrowed Shares or any part thereof or to otherwise act
hereunder, as stated above, unless and until such dispute is resolved in
accordance with Section 2.2 of this Agreement. In the event of such a dispute,
the Escrow Agent shall have the right, in addition to the rights described above
and at the option of the Escrow Agent, to tender into the registry or custody of
any court having jurisdiction, all money, Stock Certificates, Stock Powers and
property comprising the Escrowed Shares. Upon such tender, the parties hereto
agree that the Escrow Agent shall be discharged from all further duties under
this Agreement; PROVIDED, HOWEVER, that such tender shall not deprive the Escrow
Agent of its compensation hereunder earned prior to such tender and discharge of
the Escrow Agent of its duties hereunder.
3.3 RESIGNATION OR TERMINATION OF ESCROW AGENT.
The Escrow Agent shall have the right to resign at any time by giving
written notice of such resignation to the Parties and the Parties shall have the
right to terminate the services of the Escrow Agent hereunder at any time by
giving thirty (30) days' written notice (with such written notice being signed
by Purchaser and Seller) of such termination to the Escrow Agent, in each case
specifying the effective date of such resignation or termination. Within thirty
(30) days after receiving or delivering the aforesaid notice, as the case may
be, the Parties agree to appoint a successor escrow agent to which the Escrow
Agent shall distribute the funds and property then held hereunder, less the
amount of any fees owing to the Escrow Agent hereunder as of such date. If a
successor escrow agent has not been appointed and has not accepted such
appointment by the end of such thirty (30)-day period, the Escrow Agent may
apply to a court of competent jurisdiction for the appointment of a successor
escrow agent and shall be entitled to tender into the custody of such court all
funds and property then held by it hereunder, and the costs, expenses and
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reasonable attorneys' fees which are incurred in connection with any such
proceeding shall be paid 50% by Purchaser and 50% by Seller. Thereupon, the
Escrow Agent shall be relieved of all further duties and obligations under this
Agreement. The Escrow Agent shall have no responsibility for the appointment of
a successor escrow agent hereunder. Except as otherwise agreed to in writing by
the Parties, none of the Stock Certificates evidencing the Escrowed Shares, nor
Stock Powers, shall be released from the Escrow Account unless and until a
successor escrow agent has been appointed in accordance with this Section 3.3.
3.4 DISCHARGE OF ESCROW AGENT.
Upon delivery of all of the Escrowed Shares pursuant to the terms of
Article 2 above or to a successor escrow agent, the Escrow Agent shall
thereafter be discharged from any further obligations hereunder. The Escrow
Agent is hereby authorized, in any and all events, to comply with and obey any
and all final judgments, orders and decrees of any court of competent
jurisdiction which may be filed, entered or issued, and all final arbitration
awards and, if it shall so comply or obey, it shall not be liable to any other
person by reason of such compliance or obedience.
4. INDEMNIFICATION.
The Escrow Agent shall have no obligation to take any legal action in
connection with this Agreement or towards its enforcement, or to appear in,
prosecute or defend any action or legal proceeding which would or might involve
it in any cost, expense, loss or liability unless security and indemnity, as
provided herein, shall be furnished. Purchaser and Seller hereby, jointly and
severally, agree to indemnify the Escrow Agent and its officers, directors,
employees and agents and save the Escrow Agent and its officers, directors,
employees and agents harmless from and against any and all Claims (as defined
below) and Agent Losses (as defined below) which may be incurred by the Escrow
Agent or any of such officers, directors, employees or agents as a result of
Claims asserted by any person against the Escrow Agent or any of such officers,
directors, employees or agents as a result of or in connection with its
performance as the Escrow Agent under this Agreement. As between Purchaser and
Seller, each of Purchaser's and the Seller's obligation to so jointly and
severally indemnify and hold harmless the Escrow Agent and its officers,
directors, employees and agents shall be limited to one-half (1/2) the amount of
the Claim. For the purposes hereof, the term "CLAIM" or "CLAIMS" shall mean all
claims, lawsuits, causes of action or other legal actions and proceedings of
whatever nature brought against (whether by way of direct action, counterclaim,
cross action or impleader) the Escrow Agent or any such officer, director,
employee or agent, even if groundless, false or fraudulent, so long as the
claim, lawsuit, cause of action or other legal action or proceeding is alleged
or determined, directly or indirectly, to arise out of, result from, relate to
or be based upon, in whole or in part: (a) the acts or omissions of any of the
Parties, (b) the appointment of the Escrow Agent as escrow agent under this
Agreement, or (c) the performance by the Escrow Agent of its duties under this
Agreement; and the term "AGENT LOSSES" shall mean losses, costs and expenses and
amounts paid in settlement, directly or indirectly resulting from, arising out
of or relating to one or more Claims. Upon the written request of the Escrow
Agent or any such officer, director, employee or agent (each referred to herein
as an "INDEMNIFIED PARTY") Purchaser and/or Seller shall assume the
investigation and defense of any Claim, including the employment of counsel
reasonably acceptable to the applicable Indemnified Party and the payment of all
expenses related thereto and, notwithstanding any such assumption, such
Indemnified Party shall have the right, and Purchaser and/or Seller shall pay
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the cost and expense thereof, to employ separate counsel with respect to any
such Claim and participate in the investigation and defense thereof in the event
that such Indemnified Party shall have been advised by counsel that there may be
one or more legal defenses available to such Indemnified Party that are
different from or in addition to those available to any Party. Purchaser and
Seller hereby agree that the indemnification and protections afforded the Escrow
Agent in this Article 4 shall survive the termination of this Agreement, the
resignation or removal of the Escrow Agent pursuant to Section 3.3 hereof or the
tender by the Escrow Agent of the Escrowed Shares to a court pursuant to Section
3.2 hereof.
5. ESCROW COSTS.
The Escrow Agent shall be entitled to be paid a fee for its services
pursuant to the Fee Schedule attached hereto. In addition, the Escrow Agent
shall be entitled to recover all expenses incurred by it in connection with this
Agreement, including but not limited to the reasonable cost and expenses of
legal services (including attorneys' fees) in the event the Escrow Agent deems
it necessary to retain counsel. All such fees and expenses whenever incurred
shall be paid one-half by each of Purchaser and Seller, but if not so paid then
out of the Escrowed Shares. The Parties further agree that, in the event any
controversy arises under or in connection with this Agreement or the Escrowed
Shares or the Escrow Agent is made a party to or intervenes in any litigation
pertaining to this Agreement or the Escrowed Shares, the Escrow Agent may
withhold from the Escrowed Shares reasonable compensation for the Escrow Agent's
extraordinary services and reimbursement of the Escrow Agent's reasonable costs
and expenses associated with such controversy or litigation (including
reasonable attorneys' fees).
6. LIMITATIONS ON RIGHTS TO ESCROWED SHARES.
None of the Parties shall have any right, title or interest in or to,
or possession of, the Escrow Account and therefore shall not have the ability to
pledge, convey, hypothecate or grant as security all or any portion of the
Escrowed Shares unless and until such portion of the Escrowed Shares has been
released pursuant to Article 2 above. Accordingly, the Escrow Agent shall be in
sole possession of the Escrowed Shares and shall not act as custodian of the
Parties under this Agreement for the purposes of perfecting a security interest
therein, and no creditor of any of the Parties shall have any right to have or
to hold or otherwise attach or seize all or any portion of the Escrowed Shares
as collateral for any obligation and shall not be able to obtain a security
interest in any of the Escrowed Shares unless and until such portion of the
Escrowed Shares has been released pursuant to Article 2 above.
7. NOTICES.
All notices, requests or other communications required or permitted
hereunder shall be sufficient if in writing and (a) delivered in person against
written receipt therefor, or by nationally recognized express delivery or
courier service requiring acknowledgment of receipt, (b) sent by facsimile, or
(c) deposited in the mail registered or certified first class, postage prepaid
and return receipt requested (provided that any notice given pursuant to clause
(b) is also confirmed by the means described in clause (a) or (c)) to such
address or facsimile of the party set forth below or to such other place or
places as such party from time to time may designate in writing in compliance
with the terms hereof. Each such notice, request or other communication shall be
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deemed given when so delivered personally, or sent by facsimile transmission,
or, if sent by express delivery or courier service one (1) Business Day after
being sent, or if mailed, five (5) Business Days after the date of deposit in
the mail. A notice of change of address or facsimile number shall be effective
only when done in accordance with this Article 7. The Escrow Agent in its
discretion may act upon oral instructions if it believes them to be genuine, but
the Escrow Agent shall not be required to do so. If the Escrow Agent requires,
all oral instructions are to be promptly confirmed in writing, but the Escrow
Agent shall not be liable for any action or any failure to act in accordance
with oral instructions, even though it fails to receive written confirmation
from the Parties. The Escrow Agent shall be provided with specimen signatures of
the authorized representatives of the Parties. The Escrow Agent shall be
entitled to rely in good faith upon any instructions signed by any authorized
representative of the Parties, and shall incur no liability for following such
directions.
To the Purchaser: Genius Products, Inc.
000 Xxxxx Xxxxx Xx, Xxxxx 000
Xxxxxx Xxxxx, XX 00000
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
ATTENTION: Xxxxxx Xxxxxxxxxx
With copies to: Xxxxxxxx & Xxxxxxxx LLP
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
ATTENTION: Xxxxx X. Xxxxxxx, Esq.
To the Seller: American Vantage Companies
0000 Xxxxx Xxxxxxx Xxxxx, xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
ATTENTION: Xxxxxx X. Xxxxxxxxx
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
With copies to: Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
ATTENTION: Xxxx Xxxxxx, Esq.
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
To the Escrow Agent: City National Bank, national association
Wealth Management Services
Attention: Xxx Xxxxxxx/VP
0000 Xxxxxx xx xxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
11
8. ENTIRE AGREEMENT, AMENDMENTS.
This Agreement, together with the Merger Agreement (as the same applies
solely to the Parties), embodies the entire understanding of the parties hereto
with respect to the subject matter hereof and there are no other agreements or
understandings, written or oral, in effect between the parties hereto relating
to the subject matter hereof, except as specifically referenced herein or in the
Merger Agreement. This Agreement, together with the Merger Agreement (as the
same applies solely to the Parties) supersedes and terminates all prior
discussions, negotiations, understandings, arrangements and agreements by or
among the parties hereto relating to the subject matters hereof. This Agreement
may be amended, or any provision of this Agreement may be waived, so long as
such amendment or waiver is set forth in a writing executed by Purchaser and
Seller (a copy of which shall be promptly provided by the Parties to the Escrow
Agent); PROVIDED that if any such amendment or waiver would have the effect of
increasing or expanding the Escrow Agent's obligations or duties under this
Agreement, the written consent of the Escrow Agent shall be required in addition
to the written consent of Purchaser and Seller. No course of dealing between or
among the parties hereto shall be deemed effective to modify, amend or discharge
any part of this Agreement or any rights or obligations of any party hereto
under or by reason of this Agreement.
9. ASSIGNS AND ASSIGNMENT.
This Agreement and the provisions hereof shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto; PROVIDED that the Escrow Agent shall not be permitted to assign
its obligations hereunder except as provided in Section 3.2 and 3.3 above.
10. TAXATION OF DIVIDENDS.
Seller hereby acknowledges that, for federal and state income tax
purposes, any dividends or distributions on the Escrowed Shares then evidenced
by Stock Certificates held by the Escrow Agent shall be income of the Seller.
11. NO OTHER THIRD PARTY BENEFICIARIES.
Neither this Agreement nor any provision hereof, nor any document
executed or delivered herewith, shall create any right in favor of or impose any
obligation upon any person or entity other than the parties hereto and their
respective successors and permitted assigns.
12. INTERPRETATION.
The headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning
hereof.
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13. NO WAIVER.
Any failure of any of the parties hereto to comply with any of its
obligations or agreements or to fulfill any conditions herein contained may be
waived only by a written waiver from the other parties hereto. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder by such party preclude any other or future exercise of that
right or any other right hereunder by that party.
14. SEVERABILITY.
The parties hereto agree that (a) the provisions of this Agreement
shall be severable in the event that for any reason whatsoever the provisions
hereof are invalid, void or otherwise unenforceable, (b) such invalid, void or
otherwise unenforceable provisions shall be automatically replaced by other
provisions which are as similar as possible in terms to such invalid, void or
otherwise unenforceable provisions, but are valid and enforceable, and (c) the
remaining provisions shall remain enforceable to the fullest extent permitted by
law.
15. NO STRICT CONSTRUCTION.
The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their collective mutual intent, and no
rule of strict construction shall be applied against any person. The term
"including" as used herein shall be by way of example, and shall not be deemed
to constitute a limitation of any term or provision contained herein. Each
defined term used in this Agreement has a comparable meaning when used in its
plural or singular form.
16. RELEASES ON NON-BUSINESS DAYS.
In the event that a release of a portion of the Escrowed Shares
hereunder is required to be made on a date that is not a business day, such
release may be made on the next succeeding business day with the same force and
effect as if made when required.
17. GOVERNING LAW; SERVICE OF PROCESS.
ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA
IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF CALIFORNIA
SHALL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN THOUGH
UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION MAY ORDINARILY APPLY. It is the
intention of the parties hereto, HOWEVER, that the SITUS of the Escrowed Shares
created hereunder is and shall be administered in the state in which the
principal office of the Escrow Agent from time to time acting hereunder is
located. Any action or proceeding seeking to enforce any provision of, or based
13
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of California, and each of the parties hereto irrevocably
consents to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world. Each party
hereby accepts service of process by U.S. Mail, postage prepaid to the
applicable addresses set forth in Article 7.
18. COUNTERPARTS.
This Agreement may be executed in any number of duplicate counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"Purchaser" "Escrow Agent"
GENIUS PRODUCTS, INC. CITY NATIONAL BANK, NATIONAL ASSOCIATION
By: /S/ XXXXXX XXXXXXXXXX By:
---------------------------------- ------------------------------------
Name: XXXXXX XXXXXXXXXX Name:
-------------------------------- ----------------------------------
Title: CHIEF EXECUTIVE OFFICER Title:
------------------------------- ---------------------------------
"Seller"
AMERICAN VANTAGE COMPANIES
By: /S/ XXXXXX X. XXXXXXXXX
---------------------------
Name: XXXXXX X. XXXXXXXXX
-------------------------
Title: CHIEF EXECUTIVE OFFICER
------------------------
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